A former trader at Societe Generale, Kavish Kataria, was dismissed from the bank’s Delta One desk due to unauthorized risky bets that were not supposed to be made. However, Kataria claims that the bank made him a “scapegoat” for the failed trades and did not take their share of responsibility. He mentioned that the profits and losses from his transactions were routinely reported to superiors in both the Hong Kong team and the Paris head office. Despite this, he was still terminated from his position, leading him to criticize the bank for not identifying the trades at the right time.
The Bank’s Response
Societe Generale confirmed the dismissal of Kataria and his team head, Kevin Ng, following an internal review of their transactions. The bank justified the termination by stating that their control framework allowed them to identify a one-off trading incident in 2023, which fortunately did not result in any financial impact. Although the trades did not lead to any monetary losses for the bank, it was noted that the potential losses could have reached hundreds of millions of dollars in the event of a market downturn. Kataria had been dealing in options on Indian indices, which were not within his permitted trading activities, leading to his dismissal.
Kataria mentioned that the trades he made were auto-booked and that daily emails were sent out to the entire group confirming the reconciliation of the trades. He criticized his superiors for claiming ignorance about the trades, suggesting that either they were not fulfilling their duties properly or were simply unfit for their roles. Despite claiming to have generated $50 million of profits for the desk in the last eight months, Kataria was dismissed with only seven days’ salary and had his bonus from the previous year withheld. This led him to call for better regulations in the trading industry to protect traders’ rights.
The incident involving Kataria is a reminder of the critical importance of risk management in the banking sector. Societe Generale, still reeling from the 4.9 billion euros in losses incurred in 2008 by “rogue trader” Jerome Kerviel, understands the devastating consequences of inadequate risk control. The recent financial results of the bank showed a 22% decline in first-quarter net income, which was partially offset by profits from equity derivative sales. This highlights the ongoing challenges that banks face in managing risks effectively to avoid potential financial disasters.
The case of Kavish Kataria at Societe Generale serves as a cautionary tale of the repercussions of unauthorized risky bets in the banking industry. While the bank has its own control frameworks in place, it is essential for all parties involved to take responsibility for their actions and ensure that risk management practices are adhered to properly. The incident underscores the need for continuous oversight and regulation to maintain the stability and integrity of the financial system.