France warned rival banks on Tuesday not to try to grab control of Societe Generale as it reels from losses blamed on a rogue trader, but shares in the bank spiked higher on takeover speculation.
“The government is very much on its guard against all attempts to destabilize Societe Generale,” Prime Minister Francois Fillon told reporters.
“The government will not let Societe Generale be the object of hostile raids by other companies.”
SocGen’s plight has reignited longstanding speculation that BNP Paribas, France’s biggest listed bank, might bid for it. SocGen escaped a takeover bid by BNP in 1999.
BNP declined to comment on the speculation.
SocGen said on January 24 it had uncovered massive unauthorized stock trading by one of its employees that led to 4.9 billion euros ($7.2 billion) of losses.
The future of chairman Daniel Bouton hangs by a thread as the government called for changes at the helm after the world’s worst rogue trading scandal.
The bank’s board is expected to meet on Wednesday, facing embarrassment over its failure to make a fraud accusation stick against the man blamed for the losses and with doubts cast over the bank’s version of events.
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 freed him on bail.
The government has also 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.
France’s economy minister took up the charge against the bank’s leadership on Tuesday, using tough language which analysts said was unusual from a top cabinet minister.
“Societe Generale is in a crisis situation,” Economy Minister Christine Lagarde told LCI television on Tuesday.
“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.
Analysts said such 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.
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 in the dark about Kerviel’s alleged illicit trades until it spotted a discrepancy on January 18, triggering an internal investigation.
The bank on Tuesday defended recent share dealings by board member Robert Day, who had sold 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 said.
Bouton’s departure would raise a problem of succession at the bank. His heir apparent, Jean-Pierre Mustier, heads the investment division that employed Kerviel and has also been damaged by the crisis.
Kerviel, who has admitted breaking bank rules but accuses others of doing the same, has been placed under formal investigation over accusations of falsification, computer abuse and breach of trust.
Prosecutors said they would appeal against his release.
Kerviel’s lawyers were jubilant.
“There is no fraud, sir. There is no fraud. The word fraud was used by Bouton numerous times,” said Kerviel’s lawyer, Christian Charriere-Bournazel.
“Mr Bouton held this unfortunate man up for public vilification, threw him to the dogs ... and there was no substance to it,” he told reporters late on Monday.
Kerviel ran up a huge position of 50 billion euros on futures tied to European share indices. Instead of protecting the bank’s investment as he had told supervisors, he left it exposed to the risk that shares would fall.
