He is quite typical in the bank: while they win, nobody cares what you are doing.But at the time you start losing, there everyone wants to know what you were thinking.There is no way for something like that to happen without the managers being aware, even if the disregards are made.This goes beyond an irresponsible trader;It is a reflection of the bank's risk culture.
One of the greatest ironies is that these traders are valued and promoted by assuming risks.But when those risks do not result in profits, the same banks that encouraged them wash their hands.If Socgen had had an adequate control system, this would not have happened.The problem is that they are more interested in short -term profits than long -term stability.
Socgen basically gave someone the keys to someone without supervision.It is one of the greatest control failures that I have seen in the financial industry.Now the managers will take their hands and say they knew nothing.But we all know that the bank rewards those who risk, although later they are surprised when things go wrong.
This story is a great lesson about how it should not be operated.If you think the market is going to "forgive" because you are intelligent or because you are lucky, you are very wrong.Socgen has learned a painful lesson, and the truth is that this story could be repeated if other banks do not improve its control systems.
7.15 billion in losses is the definition of lack of risk management.Socgen will surely invest millions in fixing its systems, but the damage is already done.Banking should take risk management more seriously, instead of waiting for something like that to react.
This should serve as a notice for all who believe they can operate without stop loss or without risk management.This trader risk the stability of his entire bank.If Socgen was not supervising someone who handled billions, I wonder how many other banks are in the same situation.
What worries me is that other great banks are probably in the same situation, just waiting for a "super trader" to make some crazy play and repeat this disaster.Perhaps the financial industry needs more regulation to prevent someone from playing with the future of an institution as if it were a casino.
These types of cases show that no matter how big the bank is;If you don't have good controls, anyone can take it to the disaster.The market is brutal, and if you are not prepared to assume the consequences of your decisions, you end up like this trader, causing losses that leave scars in the bank and throughout the industry.
This seems taken from a movie, but it is real.One of the largest banks in problems in a trader that was believed to be invincible.It seems that Socgen is learning that blind trust in his operators can be very expensive.I hope other banks take note and reinforce their controls before another "genius" does something similar.
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