Aon Responds To Societe Generale Incident

by Stewart Douglas

Story link: Aon Responds To Societe Generale Incident

Insurer Aon has today released a statement in response to the high profile Societe Generale fraud case in which a rogue trader managed to amass some $7 billion of loss undetected by his employers, casting further doubt over the health of the banking industry, and the long term projections for Societe Generale.

Having traded under the radar for some time, an employee at the Paris based investment firm was today uncovered as having traded fraudulently under the banner of the bank, which led to substantial losses, several subsequent dismissals and extreme public embarrassment and media scrutiny for the troubled bank.

The problem has come at one of the worst times for the banking industry in recent memory, after the credit crunch and world economic slowdown has resulted in weak trading conditions for investment firms and elevated risks for largescale investment banks.

“Employee fraud, and in particular unauthorised trading, is insurable but the challenge has been persuading some banks to admit such exposure exists. The SocGen incident proves internal fraud has the potential to threaten the capital base of even the largest banks,” said Daniel Butler of the financial institutions team at Aon.

“It is not only the magnitude that is shocking but the fact that it happened at head office. Similar cases have tended to occur in far away subsidiaries and not under the noses of senior management.”

Whilst the losses have undoubtedly damaged the reputation of the bank, it is thought that the move will encourage more investment banks to take insurance against employee fraud and misdemeanour with a view to protecting against future calamities of this nature.