French Economy Minister Christine Lagarde said Societe Generale (SocGen), 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," Lagarde told LCI TV 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," she said.
French Prime Minister Francois Fillon said the government would defend SocGen from any hostile takeover.
``The government will not let Societe Generale become the object of hostile raids,'' Fillon said, adding, "The government is very attentive to any risk of destabilization of Societe Generale."
SocGen said last Thursday that it had uncovered massive unauthorized stock trading by one of its employees that led to 4.9 billion euros (US$7.22 billion) in 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. Prosecutors said they would appeal against his release.
Kerviel's lawyers, however, were jubilant.
"There is no fraud, sir. There is no fraud. The word fraud was used by [bank chairman Daniel] Bouton numerous times," 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.
Lagarde's comments put fresh pressure on Bouton to step down after French President Nicolas Sarkozy turned up the heat on SocGen's top managers on Monday evening, saying they would have to accept their share of responsibility for the world's biggest trading scandal.
Lagarde and Justice Minister Rachida Dati have said it was up to the bank's board to decide Bouton's fate. But Bouton's departure would raise a problem of succession because his heir apparent, Jean-Pierre Mustier, heads the investment division that employed Kerviel and has also been damaged by the crisis.
Meanwhile, the bank rejected claims that an American member of its supervisory board, Robert Day, had inside information about the rogue trader losses when he made two major share sales this month.
"No inside information was used in any way with respect to these December and January sales," it said.
In related developments, EU Internal Markets Commissioner Charlie McCreevy said yesterday that no regulatory measures could have prevented the SocGen crisis.
"No regulation in the world could have foreseen what happened last week in France," he told reporters in Brussels.
Later in a speech at a European Financial Services Conference, he said investors would learn to assess the value of their portfolios themselves rather than relying on credit rating agencies.
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