| Société Générale Chief Executive Daniel Bouton. |
France's Société Générale bank on Thursday disclosed a fraud will result in a €4.9 billion loss and that it will write down an additional €2.05 billion in assets related to subprime exposure. The bank also announced that it plans to raise €5.5 billion in capital in "the following weeks."
France's second-largest bank by market value after BNP Paribas said the write-down and losses related to the trading situation, will lead to a net profit of between €600 million and €800 million for all of 2007.
The bank said it found a case of fraud, "exceptional" in its nature and scope, at its French markets division last weekend. The trader was involved in conventional futures hedging on European equity market indices and had taken massive fraudulent directional positions in 2007 and 2008 beyond his authority, abusing his knowledge of the group's security systems, SocGen said.
SocGen said the trader admitted wrongdoing and that "a dismissal procedure has been initiated." In addition, his immediate supervisors will leave the bank, SocGen said. The board of directors rejected the resignation of Chief Executive Daniel Bouton, the bank said.
SocGen shares were suspended this morning and statements are due to be issued by the Bank of France and French Finance Minister Christine Lagarde are planning to issue statements later Thursday.