Police Question French Bank Trader

The French trader accused of one of the biggest bank frauds ever surfaced Saturday -- in the custody of police, who were questioning him about bad bets that cost France's No. 2 bank billions of euros in a season of jittery markets.
Financial police in Paris were questioning Jerome Kerviel in a probe into Societe Generale's allegation against the 31-year-old trader, judicial officials said. They were speaking on condition of anonymity because the investigation is continuing.
Under French law, he can be held up to 48 hours.
Kerviel has kept a low profile since the bank said Thursday that Kerviel's unauthorized trades caused it losses of euro4.9 billion (US$7.14 billion). His picture made the front page of newspapers around the world, and journalists staked out his apartment and those of his family members for days, but they did not catch him on camera -- prompting rumors he had fled the country.
His lawyer maintained he was not on the run and would speak to investigators.
His motives remained a mystery, and the bank said it appeared that he did not gain personally from the unauthorized trades. Acquaintances described Kerviel as reserved and considerate, a young man who once taught kids judo and held the door for elderly neighbors.
The debacle -- which has rattled an already nervous banking sector and appeared to be the biggest-ever trading fraud by one person -- has fueled a debate about risk management, with France's conservative president condemning speculation.
"If we can make profits in a matter of hours, we can also have huge losses," said President Nicolas Sarkozy during a visit to India. "We must stop with this system that has gone haywire and that has lost track of its aim."
"It appears to be time to ... inject a bit of common sense into all these systems," he added.
French officials have said that Kerviel, a relatively inexperienced trader, was dealing with more than euro50 billion ($73.31 billion). That is more than the bank's market capitalization of euro35.9 billion (US$52.6 billion), and is close to the annual GDP of countries such as Slovakia, Qatar or Libya.
Kerviel had been investing the bank's money by hedging on European equity market indices, meaning he bet on how the markets would perform at a future date.
Societe Generale said it discovered the fraud last weekend and unwound the trader's losing bets starting Monday, when world markets tumbled.
Some experts have suggested Societe Generale may have exacerbated the fall and indirectly led to the U.S. Federal Reserve's subsequent decision to cut rates.
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