SocGen on Thursday sought an emergency 5.5 billion capital injection to salvage its balance sheet as a result of the trading scam that has been billed the largest in history. Analysts said that SocGen’s unwinding of the massive rogue positions on Monday might have contributed to the violent slump in share prices. The bank said that its full-year net profit would drop between 600 million and 800 million from 5.22 billion from the year previous because of the fraud as well as losses resulting from volatility in U.S. subprime mortgages and monoline insurers. The bank announced further write-downs of 2.05 billion relating to the global credit crunch. Fitch Ratings has as a result cut SocGen’s rating one notch to ‘AA-‘. The fraud raised questions about the effectiveness of the bank’s systems and created a reputation of risk for the bank, the rating agency said. The trading fraud involved 31-year old options trader Jerome Kervielwho who supposedly caused SocGen to lose 5 billion ($7.3 billion). The fraud is believed to be the biggest in history, according to published reports. The bank declined to confirm the trader’s identity. The Paris prosecutor’s office has opened a preliminary criminal investigation into the presumed case of fraud after a complaint by a shareholder. Kerviel had been with the bank for about six years and was a relatively junior employee trading on small positions.
SocGen Seeks Emergency Capital After Fraud Scandal
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