Former Société Générale trader Jerome Kerviel is liable for only €1m of the €4.9 billion in losses he racked up at the bank, and not the whole amount, a French court has ruled.
The ruling by the Versailles Court of Appeals, the latest in a series of judgments on a case dating back to 2008, leaves a question mark hanging over whether the government can reclaim the €2.2 billion of tax reliefs which SocGen obtained against the losses if Mr Kerviel was not held wholly liable.
Industry analysts have said that would put its dividend at risk and affect its capital adequacy ratios.
Mr Kerviel was sentenced to three years in prison after being convicted by a Paris court in October 2010 for breach of trust and fraud over the losses caused by disastrous trades in equity derivatives.
Initially he was ordered to repay the total amount of losses incurred by SocGen, but subsequent rulings struck down that decision, and in June a public prosecutor said the bank "had left the door open" for Mr Kerviel to act illegally.
The Versailles court, charged with deciding how much Mr Kerviel should actually be liable for, agreed broadly with that view.
Mr Kerviel did indeed commit fraud, it said. But it added: "Multiple errors committed by the bank played a major and determining role in the causal processes behind the very significant harm that was done to it.
"Therefore, reparations for Société Générale attributable to Jerome Kerviel should only amount to 1 million euros."
The liability issue potentially put the tax deductibility of the loss at risk, according to the government and Kerviel's legal team.
Junior Budget Minister Christian Eckert reiterated that the government would be interested in recovering the tax and said that he, along with Finance Minister Michel Sapin had asked the French tax authorities to look into Friday's court judgment.
Mr Kerviel's lawyer David Koubbi said "someone at Société Générale should prepare to have a pen and chequebook" ready to pay back the money.
However, SocGen lawyer Jean Veil said the bank had "no worries" it could lose the right to the tax break.
"There would have to be a deliberate error, an excessive error (by the bank) and that is not what is in the ruling," he said.
A statement from the bank later said the ruling would have no impact on its tax situation.
The trader has never denied building up trading positions amounting to €50 billion, but contends his managers should have been aware of his actions, something the bank has always denied.
Either side could send today’s ruling to a higher court, which would not judge on the facts but would decide whether the appeal court's decision conforms to the law.
