French bank 'had trader warning'

French bank 'had trader warning'

Mr Kerviel has been released on bail
French stock market officials warned Societe Generale about alleged rogue trader Jerome Kerviel late last year, a Paris prosecutor has said.
With Mr Kerviel now released on bail, the prosecutor's comments increase the pressure on the bank to explain why his trades were not discovered earlier.

Mr Kerviel is being investigated for breach of trust, falsifying documents and breaching computer security.

Societe Generale says his actions cost it 4.9bn euros ($7bn; £3.7bn).

'Crisis situation'

The bank, which says it only discovered Mr Kerviel's unauthorised trades 10 days ago, had been pressing for Mr Kerviel to face the more serious charge of fraud.

Mr Bouton held this unfortunate man up for public vilification, threw him to the dogs... and there was no substance to it

Defence lawyer Christian Charriere-Bournazel

His lawyer, Elisabeth Meyer, on Monday called the judges' decision not to press for fraud charges a "great victory".

As police investigations into Mr Kerviel's actions continue, French politicians are increasing the pressure on Societe Generale's embattled chairman and chief executive Daniel Bouton.

"Societe Generale is in a crisis situation," said Economy Minister Christine Lagarde in an interview on French television.

"In a difficult moment, the board members are there to decide if the person in charge is the best placed to run the ship when it is pitching a bit, or whether they should change the captain."

French President Nicolas Sarkozy has already said that the bank's senior managers had to accept their share of responsibility for the scandal.

'Invented deals'

Societe Generale says Mr Kerviel had a position, or a bet, worth about 50bn euros on the future direction of European shares.

SOCIETE GENERALE IN FIGURES
Founded in 1864
467bn euros in assets under management (as of June 2007)
22.5 million customers worldwide
120,000 employees in 77 countries


Societe Generale share price

That was more than the bank's value - about 35bn euros - and about the size of France's entire annual budget deficit.

To avoid that potentially catastrophic loss the bank had to unwind Mr Kerviel's trades, but that still cost it 4.9bn euros.

Societe Generale said Mr Kerviel's background in handling the administration of trades enabled him to fool those monitoring traders' activities.

It says Mr Kerviel invented deals that, on paper, balanced out his bets.

'No evidence'

Mr Kerviel's other lawyer, Christian Charriere-Bournazel, said his client had committed no fraud, adding that Societe Generale's chief executive Daniel Bouton had no evidence to back up his allegations.

"The word fraud was used by Mr Bouton numerous times," he said.

"Mr Bouton held this unfortunate man up for public vilification, threw him to the dogs... and there was no substance to it."

Under French law breach of trust carries a maximum sentence of three years in prison and a fine of 370,000 euros.

While a formal investigation has started into Mr Kerviel's actions, this does not automatically guarantee that a trial will follow.

SocGen trader Kerviel is jailed

SocGen trader Kerviel is jailed

Jerome Kerviel will have to stay in prison during the investigation
The Paris appeals court has ordered the Societe Generale trader Jerome Kerviel to be jailed while massive losses at the bank are being investigated.
The court ruled that he should be detained because of the "necessities of the investigation" and the risk that he could flee the country.

Earlier, an employee of the brokerage firm Fimat - owned by Societe Generale - was also detained by police.

The man was questioned about his links to Mr Kerviel.

Fimat was a division of Societe Generale, which was recently merged with another brokerage owned by French bank Credit Agricole and renamed Newedge.

Massive losses

A report in Le Monde said Mr Kerviel had conducted some of his trades through Fimat and that police suspect the brokerage employee may have been aware of his activities.

Mr Kerviel has been blamed for incurring massive losses, costing Societe Generale 4.9bn euros ($7bn; £3.7bn).

He was freed on 28 January following two days of questioning by magistrates.

Now he will be put in "provisional detention" while the case is being investigated.

Mr Kerviel is under investigation for breach of trust, computer abuse and falsification.

Home repossessions rise to 27,000

The number of people whose homes were repossessed last year has risen by 21%.
The Council of Mortgage Lenders said 27,100 homes, the highest figure since 1999, were taken over by lenders after people fell behind with repayments.

The figure for the UK is more than the 22,400 in 2006, but not as extreme as the CML had forecast. It is still a sharp rise on the 8,500 of 2003.

And the CML warned that the number of repossessions was likely to rise again in 2008 as the credit crunch tightened.

Meanwhile, the numbers of mortgages behind on payments rose by 8.6% compared to 2006, the organisation, which represents mortgage lenders, said.

'Wider issues'

Another bill would come up which you would be paying on a credit card and you would have to pay the interest on the cards... all that adds up

Kevin Allen, who faced repossession


Homeowners 'on the rack'

Added cost pressures on homeowners are expected this year, owing to higher energy and food bills, while more than a million people are coming off fixed-rate mortgages.

Michael Coogan, CML director general, said: "The number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets."

He said that "no one is necessarily to blame for this" but called for "a fair and reasonable balance of responsibility".

Mr Coogan said consumers, their advisers and lenders, and the system of state support, all had a role to play to ensure "repossessions are minimised".

Tighter credit market

The rise in repossessions was likely to be down primarily to the credit crunch, with lenders taking fewer risks with borrowers who were already over-extended.

Charities have previously warned about some homeowners using credit cards to pay their mortgages, but with credit increasingly difficult to come by, many have been struggling to meet repayments.

Most mortgage possession claims do not end with the owner losing their home, because the lender often comes to an arrangement with the borrower to pay off the arrears.


Repossession figures are still far below levels in the early 1990s

But Sue Edwards, head of consumer policy at Citizens Advice, said:

"Our evidence shows that lenders are not always doing everything they can to help borrowers in trouble, all too often piling on extra charges and being too quick to take court action rather than being prepared to negotiate affordable repayment arrangements.

"We want to see all lenders being reasonable when dealing with customers who do get into trouble, and taking court action for possession only as a last resort."

And Shadow Housing Minister Grant Shapps said: "These figures sadly make a mockery of Labour's hollow claims to have helped more people onto the property ladder."


Interest rates

Despite the latest rise in repossessions, figures are still much lower than the numbers in the early 1990s. when they reached 75,500 repossessions a year.

The CML figures have been released the day after many of the largest - but not all - mortgage lenders announced they would pass on the 0.25% cut in interest rates in full to customers.

These lenders said the cut on the standard variable rate would come in early March.

Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, predicted further interest rates in the coming months, offering more relief to homeowners.

Godfrey Blight, chairman of the Intermediary Mortgages Lenders Association, said arrears and repossessions would rise in 2008, but not "catastrophically so".

Political row

The figures have prompted political debate.

Liberal Democrat leader Nick Clegg said: "We must take steps to ensure that repossession is only ever a last resort - by making financial advice compulsory at the point repossession claims are issued."

For the Conservatives, shadow housing minister Grant Shapps said: "These figures sadly make a mockery of Labour's hollow claims to have helped more people on to the property ladder.

"The Government needs to urgently address the issue of affordable housing."

A Treasury spokesman said: "The Government's Housing Finance Review, to be published in the Budget, will explore options to increase the uptake of affordable long-term fixed-rate mortgages."

On Monday, the Insolvency Service said the number of people declared insolvent in 2007 was 106,645, just slightly below the record high in 2006, while bankruptcies were up 2.4%.

Experts said it would be increasingly difficult for people to borrow their way out of trouble.

Those who fear getting into trouble with mortgage repayments have been urged to speak to their lender.

European Bank Holds Rates Steady

European Bank Holds Rates Steady

Published: February 7, 2008


FRANKFURT (AP) — The European Central Bank held its key interest rate steady at 4 percent while the Bank of England cut its benchmark rate by a quarter percentage point to 5.25 percent on Thursday.

Both central banks face inflation and concerns about a global economic slowdown.

The Bank of England lowered its key interest rate for the second time in three months, while the European bank left its benchmark rate at the same level it has been since June 2007.

Markets participants were waiting to hear from the E.C.B. president, Jean-Claude Trichet, for a detailed explanation behind the decision and to get some indication about the bank’s future plans.

Many say it the bank may have to cut rates later this year despite the rising level of inflation in the 15-nation euro zone — a bloc of more than 318 million people that accounts for more than 15 percent of the world’s gross domestic product.

The Bank of England’s decision was expected given that its governor, Mervyn King, has acknowledged that the bank is facing a “difficult balancing act,” with inflationary pressures from higher energy and food prices and a falling British pound weighed against data showing slowing economic activity and turbulence on financial markets.

“The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued,” the Bank of England said in the statement explaining its rate cut.

In the United States, the Fed has cut rates five times since September in an effort to spur the economy and encourage reluctant banks to issue credit to each other, companies or consumers.

But the E.C.B.’s specific mandate is to control inflation, which hit an all-time high in January of 3.2 percent, its highest level since the euro was adopted and far above the E.C.B.’s comfort level of around 2 percent. Even more worrying were the findings by Eurostat that business and consumer confidence fell to their lowest levels in two years, raising the possibility of “stagflation,” or higher prices and stagnant growth.