Thursday, January 24, 2008

Trust the French to screw up the party

Societe Generale Is Hit by 4.9 Billion Euros Fraud

Societe Generale has uncovered a fraud by one of its traders which will have a 4.9-billion-euro ($7.16 billion) negative impact on the group, France's second-largest listed bank said on Thursday.

The bank also announced further writedowns of 2.05 billion euros related to the global credit crunch and said it would raise 5.5 billion euros through a capital increase to strengthen its balance sheet.

SocGen also said its board had rejected an offer by Chairman and Chief Executive Daniel Bouton to resign.

The bank said it was in the process of dismissing the Paris-based trader and added that the trader's managers would leave the company.

The fraud echoes a similar blow last year to France's biggest retail bank, Credit Agricole, which in September announced a 250 million euro charge related to an unauthorised trading position.

Banks around the world have been hit by credit market losses related to U.S. subprime mortgages. These mortgages are the riskiest property loans, often extended to people who have payment difficulties or a bad credit history.

SocGen shares closed down 4.15 percent at 79.08 euros on Wednesday. The stock has fallen around 20 percent since the start of 2008.

The stock's opening will be delayed, traders said.

Copyright 2008 Reuters. Click for restrictions.

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