FRENCH police have searched the Paris headquarters of Societe Generale (Soc Gen), the bank at which a rogue trader is accused of massive fraud.

The bank said the search had taken place on Friday night, but gave no further details.

Police also scoured the Paris flat of Jerome Kerviel, the trader alleged to be responsible for losing the bank EUR4.9bn (£3.7bn), and took away a number of briefcases.

His whereabouts remain unknown, although his family insists he is innocent.

Rogue traders' profit boosted SocGen bonuses

Jerome Kerviel's lawyer claims executives at the French bank benefited from the successful investments of the rogue trader

• SocGen rights issue will be at a 39% discount

• SocGen trader remanded in custody after court hearing

Multimedia

• Full coverage of the SocGen scandal

• Blog: Charles Bremner on SocGen

• Video: Patrick Hosking on the impact of fraud

BACKGROUND

• Who Knew What and When?

• SocGen director probed over €100m share sale

• Ex-SocGen risk auditor calls systems a sham

The 31-year-old trader, who created a complex web of unauthorised transactions, is responsible for one of the world’s largest ever fraud by a single trader.

Societe Generale has yet to name Kerviel publicly, but it has already filed a legal complaint against the trader, which accuses him of making unauthorised financial trades and drefrauding the bank.

French prosecutors are also reported to have begun preliminary investigations based on the bank’s complaint and on two others filed by the bank’s shareholders.

Analysts are trying to assess the extent to which the “rogue trader” contributed to the dramatic fall in many stock indexes last week. Some experts initially believed the action may have influenced the US Federal Reserve’s dramatic cut in interest rates. However, the Fed was later said not to have been aware of the fraud when it made its cut.

Soc Gen is now fighting to shore up confidence in its banking system. Analysts also said the the massive fraud meant it was now vulnerable to a takeover bid.

“Societe Generale will certainly lose its independence after such an operation”, Alain Crouzat, an analyst at Montsegur Finance, told Le Parisien newspaper.

François Fillon, the French prime minister, said last Friday that his government was notified about the fraud on Wednesday, although the bank had uncovered it several days earlier: “Maybe the government should have been told earlier,” he said.

Nicolas Sarkozy, the French president, called the events at Soc Gen a “large-scale internal fraud”, but added that the losses “do not affect the solidity and reliability of the French system”.

Daniel Bouton, the bank’s chairman, described the fraud was a “one-off” and denied it was a trading or risk-management fault.

He offered his “apologies and deep regrets” in a newspaper advertisement.

The bank said the fraud was based on simple transactions, but were concealed by “sophisticated and varied techniques”.

Kerviel worked at the bank’s Delta One products team in Paris and was responsible for trading instruments based on predictions of the future performance of markets.

The bank said the trader may not have carrried out the fraudulent deals for personal gain, but that he had nevertheless taken “massive fraudulent directional positions in 2007 and 2008 beyond his limited authority”.

The losses are four times greater than those made by Nick Leeson, the rogue trader who brought down Barings Bank in 1995. He was sentenced to six-and-a-half years in jail.

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