During the spring and summer of 2008, further details released about Societe Generale's unauthorized trading losses continued to tarnish its reputation, while the outlook for banking as a whole darkened significantly, as delinquencies in U.S. residential mortgages spread losses and fear across the entire sector. The New York investment bank Bear Stearns ran out of funds in March 2008 and had to be rescued by JPMorgan Chase. IndyMac Bank failed in July, and Fannie Mae and Freddie Mac were put into receivership in September, closely followed by the bankruptcy of Lehman Brothers, rescue of Merrill Lynch by Bank of America, and the Federal Reserve's bailout of American International Group (AIG).
Meanwhile, the internal and external investigations into how Societe Generale's management and control environment allowed Kerviel to conduct his unauthorized trading for so long and in such large amounts revealed an extraordinary range of failings. This was so much that the French Banking Commission (Commission Bancaire, CB) fined Societe Generale €4 million in July 2008, an insignificant sum relative to the magnitude of Societe Generale's trading losses, but close to the CB's legal maximum.
The principal findings of the internal and external investigations were as follows.
GEDS's trading management had primary responsibility for continuously monitoring its trading positions; performing daily analysis of the coherence of risks, earnings, and positions; and ensuring that all transactions complied with the department's policies and limits. However, there was no explicit requirement to monitor cash movements. Societe Generale's systems provided trading management with a series of transaction, profit and loss (P&L), and cash flow reports and, during 2005-2006, monitoring appears to have been done in a desultory manner by Kernel's trading manager. However, after this manager's departure in January 2007, Kerviel's trading activity received no monitoring at all. Trading management was also tasked with responding to internal and external alerts and queries about the positions under their responsibility. In Kernel's case these were rare; however, an alert from Eurex about a large transaction in November 2007 related to Kernel's unauthorized directional positions was never followed up. PwC noted in particular that the rigor of DLP's front office oversight diminished as trading volume increased, allowing unauthorized activities such as day trading, P&L smoothing, and position transfers between traders to proliferate.