Tag Archives: Société Générale

Greek debt crisis: Goldman Sachs could be sued for helping hide debts when it joined euro

Goldman Sachs faces the prospect of potential legal action from Greece over the complex financial deals in 2001 that many blame for its subsequent debt crisis.

A leading adviser to debt-riven countries has offered to help Athens recover some of the vast profits made by the investment bank.

The Independent has learnt that a former Goldman banker, who has advised indebted governments on recovering losses made from complex transactions with banks, has written to the Greek government to advise that it has a chance of clawing back some of the hundreds of millions of dollars it paid Goldman to secure its position in the single currency.

The development came as Greece edged towards a last-minute deal with its creditors which will keep it from crashing out of the single currency.

The deal is based on fresh economic reform proposals submitted by Athens which bear a striking similarity to the creditors’ offer rejected by the Greek people in a referendum last Sunday – sparking claims that Prime Minister Alexis Tsipras has effectively executed a huge U-turn in order to avoid a catastrophic “Grexit”.

Greece managed to keep within the strict Maastricht rules for eurozone membership largely because of complex financial deals created by the investment bank which critics say disguised the extent of the country’s outstanding debts.

Goldman Sachs Manhattan headquarters
Goldman Sachs Manhattan headquarters

Goldman Sachs is said to have made as much as $500m from the transactions known as “swaps”. It denies that figure but declines to say what the correct one is.

The banker who stitched it together, Oxford-educated Antigone Loudiadis, was reportedly paid up to $12m in the year of the deal.

Now Jaber George Jabbour, who formerly designed swaps at Goldman, has told the Greek government in a formal letter that it could “right historical wrongs as part of [its] plan to reduce Greece’s debt”.

Mr Jabbour successfully assisted Portugal in renegotiating complex trades naively done with London banks during the financial crisis.

His work helped trigger a parliamentary inquiry and cost many senior officials and politicians their jobs. It also triggered major compensation payments by banks to the Portuguese taxpayer.

Pensioners stand outside a closed branch of the Greek National bank in Thessaloniki on June 29, 2015
Pensioners stand outside a closed branch of the Greek National bank in Thessaloniki on June 29, 2015

Mr Jabbour, who now runs Ethos Capital Advisors, has also helped expose other cases including allegations against Goldman Sachs and Société Générale over their dealings with Libya relating to financial transactions that left the country’s taxpayers billions of dollars out of pocket. Both banks deny wrongdoing.

Antigone (Addy) Loudiadis
Antigone (Addy) Loudiadis

Based on publicly available information, he believes the size of the profit Goldman made on the transactions was unreasonable. Scrutiny and analysis of the documents and email exchanges could give Greece grounds to seek compensation and assess if the deals were executed for the sole purpose of concealing the country’s debts.

Greece’s membership of the euro gave it access to billions of easy credit which it was then incapable of paying back, leading to its current crisis. Lenders took its euro membership as a stamp of creditworthiness, but the true state of its economy was far less healthy.

Under Ms Loudiadis’s guidance, Goldman swapped debt issued by Greece in dollars and yen for euros which were priced at a historical exchange rate that made the debt look smaller than it actually was. The swaps reportedly made about 2 per cent of Greece’s debt disappear from its national accounts.

The size and structure of the deal enabled the bank to charge a far bigger fee than is usual in swap transactions, and Goldman persuaded Greece not to test the transaction with competitors to ensure it was getting good value for money.

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Raiffeisen, SocGen Plummet as Ruble Slide Triggers Bank Worries

Raiffeisen Bank International AG (RBI) and Societe Generale SA (GLE), the European banks with most at stake in Russia, led European lenders lower as the ruble continued its slide today, defying a surprise rate increase.

Raiffeisen fell as much as 10.3 percent to 11.40 euros in Vienna, the lowest level since it went public in 2005. Societe Generale dropped as much as 7.3 percent to 31.85 euros, hitting the lowest intraday level since August 2013. The STOXX 600 Banks index was 1.4 percent lower at 2:25 p.m. in London.

“More fundamental concerns are building over the outlook for Russia’s economy and the likely policy response,” Neil Shearing, an economist at Capital Economics in London, wrote in a note to clients. “There remains a huge amount of uncertainty at this juncture, but the key point is that there are no benign scenarios. Even if the ruble does stabilize over the coming weeks, the economic crisis facing Russia has much further to run.”

Societe Generale is the bank that has the biggest absolute exposure to Russia, at 25 billion euros ($31 billion), according to Citigroup Inc. analysts led by Kinner Lakhani. That’s equivalent to 62 percent of the Paris-based bank’s tangible equity.

Raiffeisen has 15 billion euros at risk in Russia, almost twice its tangible equity, and it also has the biggest exposure to Ukraine, with 4.9 billion euros, according to Citigroup.

UniCredit, the third European bank strongly invested in the former Soviet Union, has 18 billion euros at stake in Russia, or 40 percent of its tangible book value, Citigroup said.

The ruble plunged to 80 a dollar for the first time today as investors speculated Russia will announce capital controls after the largest interest-rate increase in 16 years failed to revive confidence in the currency.

The currency sank as much as 19 percent to 80.10, before trading at 78 at 3:14 p.m. in Moscow. That was the biggest drop since 1998, the year Russia defaulted on its local debt.

Rogue trader Jerome Kerviel leaves French jail

French rogue trader Jerome Kerviel has left prison to serve the rest of his sentence wearing an electronic tag.

“I want to rebuild my life,” Kerviel told reporters as he left Fleury Merogis prison, south of Paris.

Kerviel, 37, was convicted of forgery and breach of trust after his trades lost his bank, Societe Generale, 4.9bn euros (£3.9bn; $6.3bn) in 2008.

He was given a three-year jail term in 2010 and after appeals, his conviction was upheld in March this year.

He spent two months walking from Rome to France before going to jail.

Jerome Kerviel was initially arrested in 2008 (18 May)

The public prosecutor ordered him to remain in jail last month after a judge ruled Kerviel could be freed if he remained under supervision with an electronic tag on his ankle.

“I am super happy to leave today,” Kerviel said as he left the jail.

“I want to have a normal life with my loved ones, start a family and finally be able to enjoy life.”

Under the terms of the electronic tagging order, Kerviel will have to remain at home on weekday nights.

Jérôme Kerviel, omniprésent cinq ans après l'affaire

He has so far spent a total of about five months in custody.

He was initially jailed after his arrest in March 2008 after his 50bn-euro gambling spree on the markets had emerged.

Although he had originally generated more than 1.4bn euros in profits in 2007, within months that had turned into enormous losses.

He argued that Societe Generale had known what he was doing but turned a blind eye.

Russia’s Evraz signs $425 mln syndicated loan

Aug 13 (Reuters) – Russian steelmaker Evraz said on Wednesday it had signed a $425 million five-year pre-export credit facility with a syndicate of international banks.

The proceeds will be used to refinance existing debt, Evraz said in a statement, adding that the pool of foreign lenders included Deutsche Bank, ING, Nordea, Societe Generale and Raiffeisen Bank.

Evraz is a rare Russian company to raise money on international capital markets at a time when tensions between Russia and the West are running high over Moscow’s role in the Ukraine crisis.

Western debt and equity markets are now largely closed for Russian borrowers after the United States and the European Union slapped sanctions on some Russian businessmen and companies, including top oil firm Rosneft and major banks Sberbank and VTB.

Evraz said in early June it was planning on securing a syndicated loan of up to $1 billion with up to 10 banks, well before the West imposed its toughest round of sanctions on Russia over fighting in Ukraine.

Bitcoin cracks $1,000 (Maybe Iceland should adopt the virtual currency)

Bitcoin cracks $1,000 (Maybe Iceland should adopt the virtual currency)

Bitcoin cracked the $1,000 mark today, reportedly driven by speculators amid widespread publicity and rising credibility for the virtual currency.

But amid these sharp gains – it’s gaining credence in China and among some powerful players in the U.S., for example – some observers warn that there’s no telling where it all ends.

As in, a poker game might work just as well.

“If you can guess where the crowd is going to go tomorrow, you can have some fun gambling here,” Professor Jim Angel of Georgetown University told The Financial Times.

The professor’s comments came as the value of one bitcoin topped $1,000 on the Mt. Gox online exchange, hitting a record $1,073, though they later slipped back.

“That it is increasingly correlating with global equity markets and as such suggests that we have a similar crowd operating in both markets, one being deeply liquid and the one built to have a deeply restricted supply,” said Sébastien Galy, part of the foreign exchange team at Société Générale.

London Gold-Fix Banks Accused Of Manipulating Benchmark Used In $40 Trillion Metal Market

Logos are seen outside a branch of Barclays bank in London July 30, 2013. REUTERS/Toby Melville

LONDON (Reuters) – Barclays <BARC.L>, Deutsche Bank <DBKGn.DE> and three other banks have been accused in a lawsuit of manipulating the London gold fix, a benchmark used throughout the $20 trillion market for the metal, Bloomberg reported. 

Kevin Maher, a New York resident who says he bought and sold gold and gold futures and options, sued in Manhattan federal court on Tuesday, the report said, alleging the five banks overseeing the century-old benchmark colluded to manipulate it.

According to the report, Maher is seeking to represent a class of all investors who, from 2004 to now, held or traded gold and gold derivatives that were priced based on the gold fix or who held or traded COMEX gold futures or options.

In a statement, Deutsche said it believed the suit was without merit and that the bank “will vigorously defend against it”. Barclays declined to comment. The other banks involved in the fix – ScotiaMocatta, Societe Generale <SOGN.PA> and HSBC <HSBA.L> – could not immediately be reached for comment.

Gold fixing happens twice a day in a teleconference between banks. At the start of each fixing, the chairman announces an opening price to the other members, who relay that to their customers and, based on orders received from them, instruct their representatives to declare themselves buyers or sellers at that price.

The price is adjusted up and down until demand and supply are matched, at which point the price is declared “fixed”. The fixings are used to help determine prices globally.

Regulators including Germany’s Bafin are looking more closely at how banks set benchmarks such as the gold fix after the Libor rigging scandal exposed widespread interest rate manipulation.

Maher is seeking unspecified damages on behalf of the class, Bloomberg said.

In January, Deutsche Bank said it was quitting the process after withdrawing from the bulk of its commodities business.

South Africa’s Standard Bank <SBKJ.J>, now selling a controlling stake in its markets unit to China’s ICBC <601398.SS>, is emerging as a frontrunner to buy Deutsche’s place in the global gold price-setting process, sources familiar with the matter told Reuters last month.

Gold price rigging fears put investors on alert

Gold bars are displayed at the headquarters of Mitsubishi Materials Corporation in TokyoGlobal gold prices may have been manipulated on 50 per cent of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy.

The findings come amid a probe by German and UK regulators into alleged manipulation of the gold price, which is set twice a day by Deutsche Bank, HSBC, Barclays, Bank of Nova Scotia and Société Générale in a process known as the “London gold fixing”.

Fideres’ research found the gold price frequently climbs (or falls) once a twice-daily conference call between the five banks begins, peaks (or troughs) almost exactly as the call ends and then experiences a sharp reversal, a pattern it alleged may be evidence of “collusive behaviour”.

“[This] is indicative of panel banks pushing the gold price upwards on the basis of a strategy that was likely predetermined before the start of the call in order to benefit their existing positions or pending orders,” Fideres concluded.

“The behaviour of the gold price is very suspicious in 50 per cent of cases. This is not something you would expect to see if you take into account normal market factors,“ said Alberto Thomas, a partner at Fideres.

Alasdair Macleod, head of research at GoldMoney, a dealer in physical gold, added: “When the banks fix the price, the advantage they have is that they know what orders they have in the pocket. There is a possibility that they are gaming the system.”

Pension funds, hedge funds, commodity trading advisers and futures traders are most likely to have suffered losses as a result, according to Mr Thomas, who said that many of these groups were “definitely ready” to file lawsuits.

Daniel Brockett, a partner at law firm Quinn Emanuel, also said he had spoken to several investors concerned about potential losses.

“It is fair to say that economic work suggests there are certain days when [the five banks] are not only tipping their clients off, but also colluding with one another,” he said.

Matt Johnson, head of distribution at ETF Securities, one of the largest providers of exchange traded products, said that if gold price collusion is proven, “investors in products with an expiry price based around the fixing could have been badly impacted”.

Gregory Asciolla, a partner at Labaton Sucharow, a US law firm, added: “There are certainly good reasons for investors to be concerned. They are paying close attention to this and if the investigations go somewhere, it would not surprise me if there were lawsuits filed around the world.”

All five banks declined to comment on the findings, which come amid growing regulatory scrutiny of gold and precious metal benchmarks.

BaFin, the German regulator, has launched an investigation into gold-price manipulation and demanded documents from Deutsche Bank. The bank last month decided to end its role in gold and silver pricing. The UK’s Financial Conduct Authority is also examining how the price of gold and other precious metals is set as part of a wider probe into benchmark manipulation following findings of wrongdoing with respect to Libor and similar allegations with respect to the foreign exchange market.

The US Commodity Futures Trading Commission has reportedly held private meetings to discuss gold manipulation, but declined to confirm or deny that an investigation was ongoing.

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