If ever a reminder were needed that technology is not
context-free, the case ofSociété Généraletrader Jérôme Kerviel
has provided one.
The 31-year-old trader from a small town in Brittany had worked
his way up from the back-office to the middle-office at the bank,
and decided to put his previously acquired knowledge of IT controls
into action. Although his job was to make opposite bets on market
directions, he actually placed one-way bets and covered his tracks
with fake electronic messaging. At the height of his success he was
£1.6bn up. Peculiar, perhaps, that he was not caught at that
stage.
The case is reminiscent of British rogue trader Nick Leeson, who
also worked his way up from the bottom at blue-blooded Barings. He
also put his back-office knowledge to his temporary advantage on
the Simex derivatives exchange in Singapore.
Leeson brought Barings down while his patrician bosses played
tennis. Société Générale will not suffer a similar fate. However,
it is not alone among French business institutions in being
dominated by the country's notoriously elitist
Grandes
Écoles system. Not for Kerviel the stratospheric salaries and
gargantuan bonuses of the top traders.
Kerviel sought to impress Société Générale's elite with big wins
facilitated by the abuse of IT. However, IT professionals in
investment banks in London are often under similar pressures to win
the favour of traders. And so, although banks can use exception
profiling to identify anomalous trading activity, traders sometimes
demand that IT overrides such systems.
Technology in and of itself cannot counter excessively risky,
not to say unauthorised, trading. Moreover, IT can enable and
accelerate such activity, as this case shows. The technologies of
control are bound to lag the technologies of making money.
However, IT as a profession could stand up for a culture of
honesty among the "big swinging dicks" of the financial
markets.