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Bank reassures Georgian customers after rogue trader incident

By Christina Tashkevich
Monday, January 28
Bank Republic, a member of the French Societe Generale group, told Georgian customers not to fear for their savings after its French shareholder revealed massive losses due to fraudulent trading last week.

The banking group announced on January 24 that a junior futures trader caused a EUR 4.9 billion (USD 7.1 billion) loss through unauthorized trades on the stock market.

Bank Republic released a statement the same day, reassuring customers there was no possibility of experiencing capital losses.

“This exceptional incident would have no impact on Georgia and Bank Republic will continue to expand its transparent activities and provide its customers with a high quality of service,” the Bank Republic’s statement reads.

Marika, a 29-year old Bank Republic client, said she trusts the bank’s statement.

“I’m not very worried. Of course, what happened caused Societe Generale problems, first of all, for the group’s image, but at the same time I don’t think it affects us—Bank Republic clients,” she said.

Bank Republic representatives said the net profit of Societe Generale group in 2007 is expected to be EUR 600–800 million, after taking into account losses from the fraudulent trading incident.

The group also said it plans to increase capital.

“As a result of this fraud and in order to strengthen its capital base, the Group will launch a capital increase of EUR 5.5 billion, with preferential subscription rights, which has been fully underwritten by a bank syndicate,” the statement reads.

The fraud has already caused the Group’s shares to go down at the stock exchange, and credit rating agency Moody’s has downgraded its rating.

While the rating agency also reviewed and made changes to the ratings of several Societe Generale subsidiary banks in CIS countries following the incident, this did not affect Bank Republic.

Societe Generale bought a 60 percent stake in Bank Republic in October 2006. Bank Republic, by its own count, now has an 11 percent market share in deposits and 8 percent in bank loans and controls 30 percent of the Georgian credit card market.

The bank’s financial figures as of September 30 put its total assets at GEL 442 million.