Le Track Record de Jerome Kerviel

Posted by John Carney, Feb 21, 2008, 3:39pm

Our eyes were already glazed over when we finally turned our attention to the the report released by Société Générale on the Jerome Kerviel scandal. The ocular varnish hardened to opaque as we skimmed through blather about how almost everything had gone right, everyone had done things well, and it was just a few bad eggs. It confirms much of what we had already concluded—that the back office lacked the knowledge and spine to really control the risk of the traders. “In some cases, according to the report, controllers who asked Mr. Kerviel about irregularities in his trades didn't understand his explanations, but they dropped their inquiries,” the Wall Street Journal writes.

We woke up a bit when we read the Journal’s summary of the report: “The findings are likely to prompt widespread soul-searching within the banking sector.” Cue laughter.

But what really got our attention and tore the scales from our eyes was the chart attached to the report. Kerviel, according to SocGen, hid his real profit and loss by displaying an "official" P&L that was very small by comparison. After the jump, we bring you the chart.

Below, the dotted, nearly horizontal, line is the official P&L. The jagged, volatile line is the real P&L.

Chart via Alea and Felix Salmon.

Société Générale Details Lapses [Wall Street Journal]

source: http://dealbreaker.com/2008/02/jerome_kerviel_charting_his_tr.php