Sarkozy doubts SocGen impact

25-01-2008

Sarkozy doubts SocGen impact
The rogue trader fraud of "considerable scope" at Societe Generale does not reflect the state of France's economy, Nicolas Sarkozy has insisted.

The French president said the €4.9 billion (£3.7 billion) fraud would not affect the "solidity and reliability" of economic conditions in the European country.

"You can't assimilate an internal problem at Societe Generale, which is the result of a large scale internal fraud, with what has happened in the international financial system and which comes from the United States," Mr Sarkozy, speaking from New Delhi during a state visit to India, said in reference to the global credit crunch.

SocGen, one of Europe's largest banks, revealed the extent of the rogue trader fraud yesterday, which it said was the result of one employee using "extremely sophisticated and varied techniques".

The news came a week after the bank admitted it had suffered a €2 billion (£1.49 billion) loss following the collapse of the US subprime market.

The bank has not identified the culpable trader, but he has been named in media reports as 31-year-old Jerome Kerviel.

France's business dailies have poured scorn on SocGen for allowing the fraud to take place.

Les Echos ran with the headline: "Societe Generale: the shock which stupefied the banking world", while La Tribune asked: "How could a bank of such calibre reputed for its experience on financial markets end up in this mess? Why did it take so long to uncover the damage?"

But full page adverts taken out in the French press by chief executive Daniel Bouton have appealed for shareholder calm.

"I understand your disappointment, your anger," Mr Bouton says in the adverts.

"This situation is perfectly unacceptable. I am aware of what the drop in the share price means for you. I ask you to accept my apologies and my deep regrets."

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