The €4.9 billion in damages that Jérôme Kerviel, has to pay Société Générale is clearly absurd. But it raises some interesting considerations.

The French court found Kerviel guilty on 7th October of contriving to rack up €50 billion in uncovered positions for his employers. He was also given five years in jail, of which two are suspended. The court had already fined SocGen a €4 million for failing to put adequate controls in place.

On a pragmatic calculation the Kerviel fine is what it cost SocGen to unwind his positions; so that’s what they claimed back from him. Sounds fair enough on the face of it, especially as the one of the presiding judges pointed out that the rogue trader had imperilled the livelihoods of 140,000 fellow employees, as his actions could have put the bank out of business. But let’s look a little more closely at cause and effect.

The mere €4 million fine of the bank seems miniscule not only in comparison with Kerviel’s but also in the context of its responsibilities to its stakeholders. By its failure to establish proper controls it jeopardised not only the well-being of those 140,000 employees but also those of the bank’s shareholders, savers and other funders and counterparties. In the context of systemic risk, the potential impacts of its failures were far greater. Their own fine could have been paid out of the annual bonus of one reasonably successful investment bank trader. It was neither proportionate to the potential consequences of the bank’s failures nor equitable in the context of the Kerviel affair.

But how much responsibility can and should a single employee bear for his or her actions? And let’s be clear, when an investor, a depositor or other bank funder provides their money to a financial institution it does just that. It trusts the financial institution not each employee. Its stakeholders can and should reasonably expect to be able trust the bank to operate, direct and control its staff and it systems appropriately.

A crime is a crime and Kerviel’s actions have been adjudged to be criminal. He should certainly not get off scot-free therefore. But there is no chance of him paying his fine unless he is extraordinarily successful over the rest of his life. It has been widely reported that on the basis of his current income it would take him 177,000 years to pay it off. I wonder if that includes accrued interest?

Banks such as SocGen should not be able to have it both ways. They must eradicate altogether the ability of any individual or group of individuals to defraud a bank of such large sums. And they should simply not allow an individual to be able to make or lose massive sums of money, which they could never obtain redress for in the event of an accident or misdemeanour.

Kerviel is to appeal the judgment. Will the outcome mean a longer jail term but less of a fine? Or will he be enslaved to the bank or at least to the courts for the rest of his life?

And what of Kerviel himself? Perhaps he should be obliged to turn gamekeeper and assist other financial institutions to plug the loopholes they may have in their systems. That way he could earn back some of his fine by logging how much their employees might have been able to take them for had he not helped them stop up the holes in their controls.