[June 09, 2010] Societe Generale: banks on trial Tweet Jun 09, 2010 (Datamonitor via COMTEX) -- The trial of Jerome Kerviel on charges of breach of trust, computer abuse and forgery while at Societe Generale has finally started. However, the trial is about much more than the individual's or the bank's wrongdoings; it is also about the levels of risks which banks take, the adequacy of controls and systems, and the future of the universal banking model. Nearly two and a half years after his original arrest, Jerome Kerviel has finally gone on trial in Paris for breach of trust, computer abuse and forgery in connection with the E4.9 billion loss announced by Societe Generale in January 2008. The stakes are immense for both parties involved, with Societe Generale also facing grave reputational damage if facts suggest or the court finds that systems were inadequate, or that management was complicit in the losses. However, amid the furious political debate on the future regulatory environment for banking, the outcome of the trial will have serious implications for all banks. Indeed, Kerviel's court battle will inevitably prompt serious criticism and discussion about many key banking issues, including the level of risks which banks take, the adequacy of controls and systems inside and outside banks, and even the ownership structure of financial services groups. Certainly, there are many who would argue that investment banking and retail banking have no place in the same group, because of the comparatively high risks associated with the former. Beyond this, the trial also promises to serve up many controversial tales from the world of investment banking and the excesses enjoyed by bankers. These will undoubtedly affect public perception of the banking establishment, the political will to clamp down on certain practices and the level of risk and reward within the industry. Banks should be doing more than just watching developments in Paris in the ensuing weeks. They should be looking at how they themselves should respond to the inevitable criticisms and debates, making sure that alternative points and arguments are put across strongly when necessary. And if the blame does seem to rest more on the bank than the banker, they need to think how they can face up to the fallout. One additional observation needs to be made here: banks also need to realize the much greater dangers that they now face from employees or ex-employees who are disgruntled or aggrieved. The crisis has badly tarnished the reputation of the entire banking industry and made the public much less trusting of banks. Anti-bank sentiment is becoming increasingly widespread, and those who would seek to do banks harm - including rogue employees - will not have to look far to find supporters. http://www.datamonitor.com Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon [ Back To TMCnet.com's Homepage ]