French bank Societe Generale is tightening its controls after a rogue-trading scandal which cost it $7.73 billion but its chairman said on Wednesday banks remained vulnerable to fraud.
"Fraud has existed in the banking industry since its birth. There have been several fraud cases and there will be others," Daniel Bouton told a parliamentary committee investigating the financial crisis that has engulfed the global banking sector.
Bouton said his bank, and others, were tighthening their control systems to include a more cross-asset, transversal overview instead of a system of limits on individual risks or traders.
On January 24, SocGen unveiled $7.7 billion of trading losses which it blamed on unauthorised stock market deals carried out by Jerome Kerviel, a junior trader at the bank.
Bouton, who was speaking in his role as chairman of the French Banking Federation, also said he saw no reason for a credit squeeze in France.
He also said banks should question whether and how they should mark to market assets in illiquid markets once the financial crisis was over.
"One will have to seriously ask what is the fair market value," Bouton said.
Bouton said it was not necessary yet to change valuation methods but banks had to think about the "serious problem" of valuation of assets in illiquid markets.
BNP Paribas froze several investment funds for a while because it was unable to price the underlying assets as there were no market prices for them. (Reuters)
SocGen tightens controls after rogue trader case