Recent Events -Soc Gen

Fraud of Euro 4.9 billion

Sub-prime Losses

On 24 January 2008, Societe Generale issued a press release announcing the discovery of a fraud by a trader responsible for plain vanilla futures hedging on European equity market indicies.

After investigating the fraud which included interviewing the trader concerned, the Group decided to close the positions as quickly as practicable.This was done at a time of very unfavourable market conditions and led to a loss of Euro 4.9 billion.

Eurex, the European-based international derivatives exchange, raised the alarm over positions taken by Jérôme Kerviel, the trader at the centre of the scandal, as early as November 2007, French investigators say.

Since the issuance of the press statement there has been significant investor, politician, market participant and general public expression of concern regarding:
risk management at the bank timing of reporting to authorities
lack of investigation when Eurex raised concern in November 2007
and when will the full story will be told.

Societe Generale also announced additional write-downs of Euro 2.05 billion against its US residential mortgage risk and its exposure to US monoline insurers. The losses relating to the fraud and the additional write-downs will be taken in the 2007 accounts and will lead to an expected loss in the Corporate and Investment Banking business of Euro 2.3 billion and an expected profit at the Bank of Euro 0.6 – 0.8 billion for the year. On 11 February the profit estimate for the Bank was increased to Euro 947 million.

The Board of Directors also decided to launch a capital increase with preferential subscription rights of Euro 5.5 billion which had been fully underwritten by JPMorgan and Morgan Stanley.