Was stock panic down to a rogue trader?

The e4.9bn in losses incurred by rogue trader Jerome Kerviel may have left Societe Generale's previously excellent reputation in tatters, but did it cause European stocks to tank last week? Unlikely.

France's Socit Gnral had been deemed a "sophisticated bank with good controls", says Edward Hadas on Breakingviews. But it has lost its reputation after unveiling e4.9bn of losses caused by rogue trader Jerome Kerviel.

Kerviel traded equity futures for the bank, betting on the direction of stockmarket indices. As with spread bets, traders can gain large exposure from a small stake. Trades are supposed to be hedged, but over the past few months Kerviel allegedly made bets in one direction and produced fictitious hedges, manipulating the bank's computer system to cover his tracks.

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