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How to make a Rogue Trader?

Updated Tuesday, 29th January 2008

What makes a rogue trader?

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I had a good laugh at last week's blog by my colleague Jason Toynbee – especially his recommendation that young city traders might be issued with ASBOs in order to stop them causing any further economic damage. Now, given the recently exposed activities of Jerome Kerviel – the French junior trader whose fraudulent transactions appear to have cost his employer Societe Generale around £4 billion – some might suggest even stronger measures are necessary.

Two men at the Stock Exchange watch falling numbers Creative commons image Icon Rednuht under CC-BY licence under Creative-Commons license

While Kerviel's story is making good copy, one problem I have with the press coverage is the depiction of him as a singular and pathological 'rogue trader'. Newspaper reports have tried to account for Kerviel's alleged actions largely by portraying him as a one-off, deviant or 'flawed' personality. Thus we learn that Kerviel was a social introvert whose 'shyness' and 'quiet demeanour' marked him as 'different' to his colleagues. The fact that he was 'never seen with a woman, or a man, always alone' is offered up to signify some (as yet unspecified) psychological problems or personality defects. Bank officials have gone further, and have been quick to identify the previously anonymous Kerviel as a manifestly 'troubled man' with an acknowledged 'fragile mental state', while nameless colleagues have also been moved to label him a 'solitary' figure who may or may not have lived in some kind of 'fantasy world'. Well, OK, perhaps he did – but to me it all sounds pretty ordinary so far. Indeed, the fact that Kerviel 'didn't chat to neighbours', or 'rarely took holidays', hardly marks him out as unusual - sounds like most people with a stressful job.

The aim of all this press-talk is clear; first to shore up belief in the idea that only isolated, 'rogue' individuals commit financial crime (a claim not borne out by any evidence), and, more specifically, to provide SocGen managers, employees and, indeed, the financial industry as a whole, the opportunity to distance themselves from Kerviel, deflecting attention from their own potential culpability in the architecture of this scandal. Indeed, it is arguable here that the media are helping to individualise what is in essence a structural and systemic problem.

So I would like to read more about how we have created a financial industry where corporate frauds have become more widespread (if not endemic), that actively encourages and rewards excessive, often reckless, risk-taking, that glamorises individuality in the context of an aggressively masculine culture of deal-breaking and profit-making, that pushes workers to extraordinary limits to achieve targets (but will deride or discard anyone unable to maintain these capriciously applied but ever-increasing standards) and that is widely perceived to lack the moral probity required to ensure effective application of regulatory controls.

In fact, it is financial institutions themselves, in slavish adherence to market principles, that create the conditions under which 'rogue' trading can occur – and so can hardly wash their hands of any responsibility when frauds arise. I read recently that Professor Roger Steare of the Cass Business School found that financial services executives subjected to ' integrity tests' tended to 'score lower than average in honesty, loyalty and self-discipline' – a worrying trend but one I think perhaps best explained not by individual pathology but by the ethical deficit contained within the system as a whole; it seems to me that these 'rogue' traders are not born - they're made.

 

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