My American audience as the French one has heard about the Societe General scandal last week. I wanted to post an article about it, not to reprimand nor find excuses to the bank, but to see how the bank can manage this crisis.
A young Trader Jérôme Kerviel took advantage of its position in the bank and his knowledge of the security system of the bank to bet millions of euros on the fall of the Stock Exchange market. As he knew most of the control procedure, he has been able to hide his fraud for a while.
The Societe General has lost because of this fraud about 5 billion euros. That is a large scandal, because this money is owned by the bank's clientele, and it is a deep crisis for this bank also because having lost this large amount of money put it in jeopardy, allowing another company to take control of it.
On a marketing and customer relationship management point of view, this case is very interesting. Indeed, this is during crisis that the value of a strong relationship show up. If the bank has been able to build over the years a strong relationship, its customers might be more opened to stay in the bank, and understand the situation.
As a finance department would attributes some assets and liquidity to prevent from exceptional needs or crisis, the customer relationship built in the past will be able to assure that customers will stay with the company.
The president of the Societe General had to launch a large campaign of communication, sending to his shareholders and customers a letter explaining what happened, how it would not affect their accounts, and to apologize. I think that actually, Daniel Bouton is doing a great job.
Will this scandal will have some effects on the bank? That is for sure. They have lost some of their brand equity and also some of their credibility, as a secured bank (which is one of the main purpose of a bank). But as I have said, as long as the bank is trusted by its customers, they will be able to overcome the issue.