SocGen Hong Kong traders leave after risky unauthorised bets are uncovered

Last year, two Societe Generale Hong Kong traders left the group after the French bank found unauthorised derivatives trading that could have cost it money during a severe downturn in the market.

confirmed Tuesday that its compliance systems had caught an “incident”, which occurred in 2023. A person with knowledge of the details stated that it took some time for the trades to be detected.

The bank stated that it identified “a single-off incident of trading in 2023 which had no impact and was followed by appropriate repair measures”.

In 2008, a rogue trader scandal led to a loss of €4.9bn for the bank on large unauthorised positions by trader Jerome Kerviel .

SocGen underwent various restructurings since then and tightened up its risk management. This was done, among other things, by Slawomir Krpa who, after being appointed nearly a year earlier, previously led the investment bank.

A person familiar with details stated that the person who traded in Hong Kong did not exceed the authorised trading amount, but placed bets linked to Indian indexes of the stock exchange on which they were not authorised.

The person said that stress tests performed after the transactions were discovered revealed that SocGen would have been at risk of losses if Indian markets collapsed within a short period of time. The trades were not a loss.

Bloomberg was the first to report on trades and departures.

SocGen France, the third largest listed bank in France, went through several restructurings and reduced some of its riskier operations under the former chief executive Frederic Oudea.

Krupa hopes to increase the share price of SocGen by implementing more reforms to reduce non-core, less profitable activities. Krupa has described his plan a “realistic strategy” that will result in lower profitability and slower growth than originally forecast.

Investors were not happy when this outlook was presented for the first time in September 2023. SocGen’s shares haven’t fully recovered from a fall of nearly 13 percent on the day the strategy update was released, but they are up just 6% this year. The bank will report its first-quarter results this Friday.