The report from the French Justice Ministry came out last night (our time). My French is less than perfect and certainly not up to the job of translating what is a torturous navigation around a legal minefield, so I have been reviewing the published articles on it.

The best I have found is, as usual, from the FT. I would encourage a read if you are interested in the this whole sorry saga. The best quote, though, came from the press conference:

“Very clearly some internal control procedures didn’t work” Christine Lagarde, French Finance Minister, a quote that clearly falls into the “No S***!” category.

As almost always happens with frauds on this scale, some warnings were ignored. The French market authorities did warn SocGen on some unusual positions being taken and the French banking authorities did notice control weaknesses in their surveillance as part of the Basel II process.

Of course, for both of these the bank may have thought it was OK in ignoring them. The warnings from the markets may have only triggered a quick internal probe that identified apparently  balancing trades on other markets or internally – precisely the types of arbitrage activities he was meant to be doing. Regulatory visits (I can say from experience) always identify internal control weaknesses no matter how good controls are. Regulators are also typically not as experienced in the markets as your own middle office, so bank management tend to either ignore or patronise regulatory reports.

The quick report that has been released, though, can’t be the final word. In a way, I just hope he does not plead guilty so that the whole thing comes out in court. That promises to b

e fascinating.