Pressure mounts on Societe Generale ahead of board meet
Societe Generale chairman Daniel Bouton faced increasing pressure from French officials to answer for the rogue trader disaster rocking the bank ahead a meeting Wednesday of its board of directors.
As questions swirled over Societe Generale's failure to prevent a junior trader racking up losses of $7.1 billion, Finance Minister Christine Lagarde stressed on Tuesday it was "up to board members" to decide on Bouton's future.
"Societe Generale is in crisis," she said, adding that "the board members are there to decide whether or not the person in charge is the best one to steer the ship or if a change of captain is needed."
The head of the French Senate finance committee, Jean Arthuis, went further: "I don't think Bouton has any choice but to leave."
Societe Generale's board turned down the 57-year-old Bouton's offer of resignation last week, after the colossal losses were announced, asking him to steer the bank through the crisis.
One of the best paid French executives, with a salary of 3.3 million euros in 2006, Bouton said he would forego six months' pay and reaffirmed on Monday that his offer to resign was still on the table.
But as the French government stepped in to warn market predators away from the crisis-hit bank, seen increasingly as a takeover target, the decision to keep Bouton in place came under scrutiny.
President Nicolas Sarkozy zeroed in on Bouton's role as head of the chain of command on Monday.
"I don't like to carry personal judgement on people, especially when they are in trouble."
"But we are in a system where, when you have a big salary, which is without doubt legitimate, and there is a big problem, you cannot escape your responsibilities," he said.
According to the business daily La Tribune, the government was ruffled by the impression of "impunity" given to top executives at the bank.
Across the Atlantic, Citigroup chief Charles Prince lost his job in October as the world's top banking group announced multi-billion-dollar losses linked to the subprime mortgage crisis.
Earlier that month, the global investment bank Merrill Lynch ousted Chairman Stan O'Neal after posting some of the biggest losses in its 93-year history.
France's third biggest bank by market capitalisation, Societe Generale has blamed its colossal losses on junior trader Jerome Kerviel, 31, who was charged Monday for a series of offences -- but not fraud as the bank had claimed.
Bouton, who joined Societe Generale in 1991, taking over as chairman seven years later, has rejected accusations by Kerviel's lawyers that the bank was looking for a fall guy to cover its managerial failings.
But there has been considerable scepticism about the possibility of a junior trader to evade controls without management's acquiescence, with Kerviel telling prosecutors his bosses must have been aware he placed tens of billions of euros in risky futures trades.
"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."
In a letter to clients, Bouton insisted Societe Generale would rebound and had a bright future ahead.
But the Societe Generale case dwarfs that of Nick Leeson, who lost $1.5 billion as a Singapore-based trader at Barings, causing the collapse of the British bank in 1995.
This latest crisis all but wiped out the bank's 2007 profit and left it as a potential takeover target, with France's top two banks BNP Paribas and Credit Agricole said to be poised to pounce.
Prime Minister Francois Fillon vowed Tuesday to defend the bank against "hostile raids" on the stock market, but Sarkozy was reportedly angered not to have been informed sooner of the looming crisis, according to Le Monde newspaper.
Pressure on the bank has 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 -- allegations denied by the bank.
But Le Monde also warned "there is no guarantee that this pressure will have any effect on the bank's board, fiercely attached to its independence from political power since it was privatised in 1987."
And in the event Bouton is forced to leave, the newspaper noted, he is entitled to a golden parachute, estimated at 10 million euros, to guarantee him a comfortable landing. (AFP)
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