Rogue trader costs bank €5bn

Societe Generale (SG), one of Europe's biggest banks, has blamed one rogue trader for a fraud of €4.9 billion (£3.7 billion).

The French finance giant says that the Paris-based individual was responsible for fraud "exceptional in its size and nature" in 2007 and 2008, which was discovered on January 19th and 20th this year.

SG says that because of the "combination of the size of the positions and the very unfavourable market conditions encountered" it has decided to recognise the huge loss in its 2007 pre-tax income.

"The trader's positions have been reviewed and a thorough analysis of all his department's positions confirmed the isolated and exceptional nature of this fraud," SG said in a statement.

"The employee who has confessed to the fraud has been suspended and a dismissal procedure has been initiated. The individuals in charge of his supervision will leave the group."

Partly as a result of the fraud, SG says it expects its 2007 net income to be between €0.6 and €0.8 billion (£0.5 and £0.6 billion).

SG will now launch a bank syndicate-underwritten capital increase of €5.5 billion (£4.1 billion), with preferential subscription rights.

It will also seek writedowns of €2.05 billion (£1.53 billion) euros in order to offset the fallout from the US subprime crisis, it added.

After the scale of the fraud emerged the firm's chief executive Daniel Bouton offered to resign but the board of directors yesterday rejected his offer and "reaffirmed its confidence in him and in the group's management".

Full-year figures are due to be released on February 21st this year.