PARIS (AFP) — The French government vowed Tuesday to fight off any hostile takeover bid for Societe Generale as the bank's chairman faced mounting pressure to stand down over multi-billion-euro rogue trade losses.
Finance Minister Christine Lagarde warned the bank was "in crisis", calling on Societe Generale's board to decide the fate of chairman Daniel Bouton following the losses of 4.82 billion euros (7.1 billion dollars).
Although Lagarde said she was "not convinced" the bank needed a "change of captain", President Nicolas Sarkozy zeroed in on Bouton's role as head of the chain of command on Monday.
"I don't think Bouton has any choice but to leave," argued the head of the French Senate finance committee, ruling party deputy Jean Arthuis.
As the bank's shares soared on rumours it could be a takeover target, Prime Minister Francois Fillon warned the government "will not allow Societe Generale to be the target of hostile raids."
"Societe Generale is a great French bank... and the government intends it to remain a great French bank and globalised player," Fillon said.
France's top two banks, BNP Paribas and Credit Agricole, are said to be poised to pounce on the ailing giant, which employs some 130,000 people. Britain's HSBC and Barclays have also been named as potential bidders.
Takeover rumours pushed shares in the bank, France's third biggest by market capitalisation, up 8.94 percent to 77.40 euros in mid-afternoon trading.
Societe Generale has blamed the rogue trade debacle, announced at the same time as two billion euros of losses on US subprime loan market, on unauthorised deals by 31-year-old trader Jerome Kerviel, under investigation in the case.
Kerviel was placed under formal investigation on Monday for breach of trust, using false documents and unauthorised computer access, but judges did not approve the more serious charge of fraud. The prosecution is appealing against the decision to release him from custody.
The trader's lawyer Elisabeth Meyer said her client was "completely crushed by the media storm surrounding the case."
Fuelling questions over how much the bank knew, a judicial source said Kerviel told prosecutors his bosses must have been aware he placed tens of billions of euros in risky futures trades.
He had bought futures in three European indices -- the Eurostoxx, the DAX in Frankfurt and the FTSE in London -- effectively betting on the future direction of the stock market.
"I remain convinced that they knew about my positions," Kerviel was quoted as saying in leaked records of his questioning at the weekend. "It is impossible to generate that kind of profit with small positions."
The trader was holding positions worth about 50 billion euros (73 billion dollars) when irregularities were first detected -- well in excess of the bank's market value of 35.9 billion euros and its shareholder funds.
According to the prosecution, Societe Generale challenged Kerviel several times about risky operations, and each time he produced fictitious documents to justify himself.
But Kerviel's lawyers have accused Societe Generale of turning on their client as part of a bid to "create a smokescreen" to cover up wider losses from the US subprime crisis.
Pressure on the bank was compounded by claims that an American member of its board, Robert Day, had inside information about the rogue trader losses when he made two major share sales this month.
The bank said in a statement that Day "was not advised" about the colossal losses when he sold 40.5 million euros worth of shares on January 18 -- the day suspicions of unauthorised trading first emerged -- and 85.7 million euros in shares on January 9.
Two foundations linked to the American investor also sold shares on January 10.
But the French financial regulator AMF said Tuesday it had opened an investigation into the share sales.
A group of 100 Societe Generale shareholders has already filed suit alleging insider trading and manipulation of share prices while two other groups of small shareholders were also taking legal action.
Copyright © 2013 AFP. All rights reserved. More »