SOCIETE GENERALE

SocGen chief Bouton to stay on

Wednesday, January 30, 2008

Société Générale directors decided at a board meeting in Paris on Wednesday to confirm Daniel Bouton as executive chairman of the bank. They also set up a special committee to deal with the €4.9 billion fraud crisis. (Story: J. Creedon)

Societe Generale's board of directors on Wednesday kept chairman Daniel Bouton at the helm but left him off a special committee to manage a crisis at the bank caused by a multi-billion-euro trading scandal.

The board "unanimously reaffirmed its confidence" in Bouton during a meeting called to deal with the loss of 4.82 billion euros (7.1 billion dollars), said a bank spokesman.

But while Bouton stayed on as chairman, a new three-person committee made up of independent directors with extensive powers was created to take charge of the situation.

The committee of three directors -- Jean-Martin Folz, Antoine Jeancourt-Galignani and Jean-Martin Azema -- was appointed to "ensure that the management of the situation is conducted in the best interests of the company, its clients, its shareholders and its employees," the statement said.

It will conduct a full audit and shed light on the "mechanisms behind the fraud," said committee chairman Jean-Martin Folz in a statement.

France's third-biggest bank by market capitalisation, Societe Generale has blamed the losses on rogue trader Jerome Kerviel, who allegedly stole computer codes and falsified documents to place billions of euros in futures trades.

Societe Generale's management has been in the line of fire over the trading scandal, announced at the same time as two billion euros of losses from US subprime loan crisis.

President Nicolas Sarkozy had all but called for Bouton's resignation on Monday saying there must be "consequences" for those in the bank's upper echelon over the debacle.

But Bouton won support from the board which 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 capital to stay afloat.

Several hundred employees rallied in front of the bank's headquarters on the western outskirts of Paris to show support for the executive, 57, who has already offered to resign over the scandal.

Shares in Societe Generale jumped Tuesday on reports it could be a takeover target, but it slid back on Wednesday as did most banking shares pending news of the US Federal Reserve interest rate decision.

France's top two banks BNP Paribas and Credit Agricole are said to be poised to pounce on Societe Generale, but 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 vowed on Tuesday that the government would defend the bank against "hostile raids" on the stock market, insisting that Societe Generale should remain "a great French bank."

The European Commission, which monitors the EU internal market, urged France on Wednesday not to adopt a protectionist stance to any hostile takeover bid for the group.

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.

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related links

30/01/08 Pressure mounts on Société Générale
29/01/08 Société Générale shares soar after merger rumours
28/01/08 French trader released on probation
27/01/08 Lawyer: Kerviel did nothing wrong