Just in case someone wants to care: what counts (literally) in the Jérôme Kerviel situation and subsequent debacle at the Société Générale are the middle and back-office operations. Not really an heroic story of front-office formulaic imagination, though. Rather a tedious plot of late-night inscription and description of trades. The main socio-technical character here is Eliot (the in-house post-trade information system at Société Générale Corporate and Investment Banking, kindly presented by Duo&Co in a couple of explanatory posts here and here, which were recommended by a sociologist of finance under journalistic assault).

(BTW: the above-mentioned favorite sociologist of finance also provided this extremely useful piece of analysis.)

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  1. panik

    Talking about post-trade information systems as characters (protagonists?) in such sociotechnical dramas, there is an interesting article in Journal of Information Technology (2003); 18(2); pp.93-101 by Helga Drummond about information technology as an ‘accomplice’ to Nick Leeson, who – in a not entirely dissimilar case – brought down Barrings Bank in 1995. Transgressing the boundaries/conflicting logics of front/middle and back office that are seen in financial circles as a source of so much inefficiency looks like a dangerous activity.

    http://www.palgrave-journals.com/jit/journal/v18/n2/abs/1990185a.html

  2. panik,

    Thanks for a most interesting reference. Another one, in a similar but more actor-networkish vein:

    http://org.sagepub.com/cgi/content/abstract/13/3/421

  3. panik

    Just in terms of updating the debate and adding some more detail regarding the allocation of roles in this story, it was interesting to read the report from Finance Minister Christine Lagarde that, according to The Guardian ( http://www.guardian.co.uk/business/2008/feb/05/europeanbanks.banking ), points to “eight elements of internal control that were inadequate and may have been decisive factors behind the crisis”. These include, “how SocGen responded to alarms raised by the Eurex derivatives market in late November 2007, the security of its IT systems and protection of log-ins, confirmation of all transactions with all counter-parties, respect of ‘Chinese walls’ between front and back offices, monitoring of cancellations and changes in trades coming from a single trader, and “atypical” behaviour such as failure to take holidays”.

    I particularly enjoy the irony of the Finance Minister of the current French government highlighting the “failure to take holidays” as a risk factor.

    Meanwhile, Kerviel himself has also been giving his version of what happened, explaining how his concealment methods were “not sophisticated at all”, how he “never had any personal ambition in this affair” and his aim was “to earn money for the bank” but had just “got carried away” ( http://www.guardian.co.uk/business/2008/feb/05/europeanbanks.europe ). In a comment that brings to mind Knorr-Cetina, K. (2005). How Are Global Markets Global? The Architecture of a Flow World in the “The Sociology of Financial Markets” by K. Knorr Cetina and A. Preda (Oxford University Press) and Knorr-Cetina, K. and U. Bruegger (2002). “Global Microstructures: The Virtual Societies of Financial Markets” in the American Journal of Sociology 107(4), pp.905-950, Karviel said: “You lose your sense of the sums involved when you are in this kind of work. It’s disembodied. You get a bit carried away.”




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