Finance minister says SocGen in 'crisis'

France's economy minister said Societe Generale, reeling from losses blamed on a rogue trader, is a bank in crisis and may need to ditch its chairman.

"Societe Generale is in a crisis situation," Economy Minister Christine Lagarde told LCI television yesterday.

"In a difficult moment, the board members are there to decide if the person in charge is the best placed to run the ship when it is pitching a bit, or whether they should change the captain," Lagarde said.

On Jan 24, SocGen said it had uncovered massive unauthorised stock trading by one of its employees that led to 4.9 billion euros of losses at the 144-year-old bank.

Jerome Kerviel, a 31-year old junior trader, was placed under investigation for breach of trust and other misdeeds on Monday, but judges threw out the stronger accusation of fraud made by the bank and prosecutors and freed him on bail.

The government has openly expressed annoyance that it was not tipped off sooner that a crisis was brewing before the SocGen scandal broke last week.

SocGen's managers suffered more embarrassment when a French prosecutor revealed on Monday that Eurex, a derivatives exchange owned by Deutsche Boerse, had questioned Kerviel's trading positions in November, but that Kerviel had been able to sidestep questions from his employer.

Lagarde's comments put fresh pressure on SocGen's executive chairman, Daniel Bouton, to step down after French President Nicolas Sarkozy turned up the heat on SocGen's top managers on Monday evening.

The president said they would have to accept their share of responsibility for the world's biggest trading scandal.

"When you have a fat salary, no doubt entirely legitimate, and then a big problem crops up, one cannot expect to wash one's hands of responsibility," Sarkozy said.

Bouton, who last week offered to leave but was asked to stay on by the board, said on Monday his resignation remained on the table, suggesting he is aware his position may be unsustainable.

SocGen, which in recent years has become a global leader in financial derivatives trading, has said it was completely in the dark about Kerviel's alleged illicit trades until it spotted a discrepancy on Jan 18, triggering an internal investigation.

The bank yesterday defended recent share dealings by board member Robert Day, who had sold off SocGen shares a few weeks before it revealed massive losses.

"No inside information was used in any way with respect to these December and January sales," it added.

Agencies

(China Daily 01/30/2008 page16)