Traders in Hong Kong’s SocGen exit following discovery of unauthorized risky bets

In a shocking turn of events, two Société Générale traders in Hong Kong have left the group after the French bank uncovered unauthorized derivatives trades that could have resulted in significant losses in a severe market downturn. The incident, which occurred in 2023, was only recently confirmed by SocGen, stating that it had been caught by their compliance systems.

According to a source familiar with the details, the trades went undetected for some time before being discovered. The bank described the incident as a “one-off trading incident” that did not ultimately result in any financial impact, thanks to appropriate corrective measures being taken.

This incident brings back memories of a rogue trading scandal in 2008, which led to a €4.9 billion loss for SocGen due to unauthorized positions taken by trader Jérôme Kerviel. Since then, the bank has undergone various restructurings and tightened its risk management protocols, especially under the leadership of new CEO Slawomir Krupa.

The unauthorized trades in Hong Kong involved bets on options contracts linked to Indian stock market indices, which the traders were not authorized to carry out. Stress testing conducted after the discovery of the trades revealed that SocGen could have faced significant losses if the Indian markets had collapsed suddenly. Fortunately, no losses were incurred in this instance.

Investors are closely watching SocGen’s next moves, as Krupa aims to boost the bank’s share price through further reforms. Despite a less optimistic outlook presented in September 2023, SocGen shares have seen a modest increase this year. The bank is set to report its first-quarter results on Friday, providing more insight into the impact of this recent incident on their financial performance.