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French Government to Protect Bank After $7 Billion Loss

January 30, 2008 12:00 PM
by findingDulcinea Staff
The French premier pledges to protect Societe Generale from hostile takeover bids after the bank lost $7 billion, allegedly through the activities of a rogue trader.

30-Second Summary

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In a Jan. 29 statement, French Prime Minister Francois Fillon said, "The government will not let Societe Generale become the object of hostile raids from other banking establishments."

He added that the “government is very attentive to any risk of destabilization of Societe Generale.”

Nonetheless, the bank’s shares have gone up almost 9 percent on takeover speculations, Agence France-Presse reported.

Fillon’s comments come after top French politicians, including President Nicolas Sarkozy, began pressuring SocGen to allow Chief Executive Daniel Bouton to step down. However, the bank’s board rejected Bouton’s previous offer to resign.

John Holmes, an analyst with the investment bank Keefe, Bruyette & Woods, agrees with the board's actions. "The last thing that Societe Generale needs right now, as well as for this to happen, is to lose their chairman," Holmes told Forbes magazine.

SocGen has blamed 31-year-old trader Jerome Kerviel for the $7 billion loss, accusing him of placing unauthorized bets on the future prices of European stock indices.

According to The Wall Street Journal, Kerviel's actions may have gone undetected because he held such a low position in the company hierarchy "that some didn't consider him a trader at all."

Headline: 'France Warns Off Hostile Bidders for Crisis Bank Societe Generale'

Background: Rogue trader costs Societe Generale $7 billion

Opinion & Analysis: Kerviel, Bouton in the spotlight

Reference: Hostile takeover defined

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