Comment: Trust the French

In theory, the stock market should have been informed on Monday morning, as soon as the £3.6 billion deficit became apparent, but Société Générale and the French Central Bank made sure the bank was safe until the news was announced. The contrast with the UK regulators and their panicked and in the end, very public, handling of Northern Rock could not be greater. It makes a mockery of Bank of England Governor Mervyn King's assertion that EU rules prevented the secret rescue of Northern Rock.

While SocGen seems capable of riding out the crisis, the shock is palpable. At Davos, where many of the world's banking chiefs are gathered, the reaction is "there but for the grace of God". The French bank was not badly managed but was one of the best, consistently coming top of risk management surveys.

What has happened haunts the mind of every senior banker and government regulator. Just as with Nick Leeson, the original "rogue trader" who brought down Barings in 1995, an individual has been able to run up losses that blow the mind. Leeson worked in the bank's back office in Jakarta. He won the trust of his superiors who put him in charge of Singapore. They failed to spot that he was de facto head trader and de facto in charge of the back office. Unknown to them, he ran up huge positions in Nikkei futures and Japanese government bonds, hiding his trades in a dormant account.

On 23 February 1995, he flew to Kuala Lumpur, leaving behind a £827 million black hole. Barings would have liked to have kept it hidden but had no choice - Leeson had bankrupted them.

The SocGen case also involves someone who could combine expertise in administration and invigilation, with trading. He worked in the "middle-office" - the bridge between the traders and the back office where the deals are settled and processed. He became a futures trader, specialising in the European stock market indices such as the FTSE and the German Dax. His job was to examine the bank's portfolio of equities, assess its exposure and counter danger by taking futures positions. But he seems to have been able to circumvent the limits that would have existed on his trading.

Last year, he was "short", betting the market would fall. Then, at the beginning of this year he rashly went "long", believing the indices would rise. The normal alarm bells that would have run were effectively switched off - he knew how to disable them. When the bank did uncover what he was doing, the full horror was exposed.

What was unfortunate was that they had to make their "sell" orders, winding down his positions, on Monday - the very day the European markets went into free-fall. Just how much SocGen's move added to Monday's chaos isn't clear - certainly a bank pushing through orders on that scale would not have helped.

As bankers pick up the pieces, the lesson of this latest fraud is already clear: don't allow those with experience of working the checks and balances to trade. It was the same advice that could have been drawn from Barings. Here we are again. Perhaps this time, they will sit up and take notice.