A French court has ruled that Jérôme Kerviel has to pay €49 billion in restitution to Société Générale (New York Times coverage here).
Bloomberg covered the ruling live and its camera cut back-and-forth between experts and the waiting camera crew. Experts discussed the media’s ‘rogue trader’ narrative and how Kerviel compared to Bernie Madoff (PBS Frontline special) and to Nick Leeson (my analysis two years ago here). They suggested the court ruling had a political dimension designed to shield French banks.
Academics will use this ruling to write several journal articles: (1) how the ‘rogue trader’ narrative has become a journalistic short-cut with on-call experts and trading room anecdotes, rather than indepth analysis about the governance problems at financial institutions; (2) a comparative analysis of cases, including the cohort effects of placing Kerviel amidst Madoff and Leeson; and (3) a critique of why Kerviel is singled out yet Société Générale’s senior management avoids criticism over trading room incentives that influence unethical behaviour.
For case studies read John Marthinsen’s Risk Takers (2nd ed) (Pearson/Prentice Hall, Boston, 2009) on the misuse of financial derivatives in trading, and the failure of organisational risk management systems. Thomas Kaplan has compiled a New York Times gallery of rogue traders.