Societe Generale CEO holds job

January 30, 2008 7:31:59 AM PST
French bank Societe Generale's board of directors decided Wednesday to keep Chairman and CEO Daniel Bouton, despite mounting pressure for his resignation over huge trading losses. The decision came as the Bank of France chief said the bank did not always properly follow up on warnings about an alleged rogue trader.

The board unanimously asked Bouton and co-chief executive officer Philippe Citerne to continue to lead the company, spokeswoman Laura Schalk said.

The board "confirms its confidence" in Bouton and Citerne, independent board member Jean-Martin Folz told reporters outside company headquarters.

Also Wednesday, the set up an independent committee, headed by Folz, to investigate billions in losses that the bank blames on a single trader.

PricewaterhouseCoopers will assist in the probe, the bank said in a statement. It will examine the cause and size of the trading losses and look into whether the bank accurately relayed information about the scandal.

Bouton offered to resign as the trading crisis unfolded last week. The bank said it lost 4.82 billion euros ($7.09 billion) unwinding the trades of 31-year-old Jerome Kerviel, who is under investigation.

Bouton said before the meeting that his offer remained on the table.

Several hundred bank employees poured out of its headquarters to defend Bouton in an impromptu demonstration during the board meeting, saying his departure would only make things worse.

The board meeting was to be followed by a gathering of bank employees, worried about their jobs and the fate of one of Europe's most respected banks.

Meanwhile, the French Senate began hearings Wednesday of the head of financial market regulator AMF and the director of the Bank of France, about how Societe Generale could have gotten in such a tangle.

The bank's management is also facing new accusations by Kerviel, who told investigators that his bosses turned a blind eye to his questionable trades as long as he brought in money for the bank.

Amid concerns that a gem of France's banking industry is in jeopardy and vulnerable, Prime Minister Francois Fillon said Tuesday his government will seek to block any hostile bid for the bank.

Government spokesman Laurent Wauquiez said Wednesday, "If at some point there needs to be extra financial support for Societe Generale, it must be done as much as possible in the interests of the French banking industry."

That prospect raised eyebrows in Brussels, where the EU internal markets commissioner cautioned France on Wednesday to treat potential bidders for Societe Generale equally and without regard to national interests.

"The same rules apply as in other takeover situations under free movement of capital rules. Potential bidders are to be treated in an undiscriminatory manner," Charlie McCreevy said in a statement through his spokesman.

Analysts are also speculating about the dismantling of Societe Generale, with its units being divided up among other leading banks.

Analysts say France's largest bank and Societe Generale's chief competitor, BNP Paribas, would be the most likely buyer of all or part of the struggling bank. Other names mentioned include French rival Credit Agricole, Britain's HSBC Holdings, Germany's Deutsche Bank AG, Spain's Banco Santander SA and Italy's UniCredit SpA.

BNP chief financial officer Philippe Bordenave, speaking as the bank announced a drop in fourth-quarter profits for 2007 on Wednesday, refused to comment on Societe Generale's future.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

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