Societe Generale chief stays but crisis team takes charge
Board kept faith with chairman Daniel Bouton but left him off a new committee to take charge of the crisis over multi-billion-dollar rogue trader losses
PARIS, January 30, 2008 - Societe Generale's board on Wednesday kept
faith with chairman Daniel Bouton but left him off a new committee to take
charge of the crisis over multi-billion-dollar rogue trader losses.
Amid heightened reports of rival banks preparing takeovers, the European
Commission warned French authorities to make sure foreign banks get an equal
chance with domestic institutions.
The board "unanimously reaffirmed its confidence" in Bouton during a
meeting on the crisis caused by the 4.82 billion euros (7.1 billion dollars)
of losses blamed on junior trader Jerome Kerviel, said a bank spokesman.
A new three-man crisis committee of independent directors was created to
manage the fallout from the biggest trading scandal in investment bank history.
Led by former Peugeot Citroen chief executive, Jean-Martin Folz, the team
will conduct an audit and investigate the "mechanisms behind the fraud," the
bank said in a statement.
Societe Generale has accused Kerviel of stealing computer codes and
falsifying documents to place more than 50 billion euros (73 billion dollars)
in futures trades.
The bank's management is fighting a storm of criticism over the scandal,
made worse by two billion euros of losses in the US subprime loan crisis.
Central bank governor Christian Noyer told a Senate finance committee
hearing Wednesday that risk control checks at the bank had broken down.
"All of the permanent control mechanisms at Societe Generale do not appear
to have worked as they should have," Noyer said.
"Those that did work were not always followed up properly."
President Nicolas Sarkozy had signalled he wanted Bouton out of the bank
because of the scandal but the board called for him to stay at the helm as
Societe Generale struggles to ward off potential takeover bids and raise 5.5
billion euros in fresh capital to stay afloat.
For his part Bouton, said he was "absolutely determined" to ensure that
clients and employees do not suffer as a result of the scandal.
Asked by France 2 about a possible bid for the bank, Bouton said "rumours
about the future of Societe Generale have been going around for 12 years."
Separately, union officials said the chairman told the bank's works
committee that six officials had been dismissed, a move anticipated last week
when he announced the losses.
Several hundred employees rallied in front of the bank's Paris headquarters
to show support for Bouton, 57, who offered last week to resign over the
Shares in Societe Generale jumped Tuesday on reports it could be a takeover
target and extended gains Wednesday.
France's top bank BNP Paribas is said to be poised to pounce on Societe
Generale but number two Credit Agricole as well as Britain's HSBC and
Barclays, Germany's Deutsche Bank, Spain's Banco Santander and Italy's
UniCredit have all been cited as potential bidders.
Prime Minister Francois Fillon has vowed that the government will defend
the bank against any "hostile raids," insisting that Societe Generale should
remain "a great French bank."
The European Commission warned France against a protectionist stance to any
hostile foreign bid.
"Potential bidders are to be treated in an a non-discriminatory manner,"
said a Brussels spokesman for EU Internal Markets Commissioner Charlie
A Societe Generale board member told AFP that Bouton had told Wednesday's
meeting a friendly takeover offer should be "examined," though he did not
believe such a bid was imminent.
Societe Generale denied Bouton had made such a comment.
Pressure on the bank has also been compounded by allegations of insider
trading linked to share sales by an American board member, Robert Day,
prompting three shareholder groups to take legal action.
Kerviel, 31, has been charged with falsifying documents and unauthorized
computer access. He has told prosecutors that his bosses must have been aware
of his dealings because of the profits he was generating.
"When I was in the black, my hierarchy was turning a blind eye towards the
details and the sums involved," he said in his deposition, according to a