The board of Société Générale (SocGen) is set to call in independent auditors to examine the events leading up to the biggest rogue trading scandal in banking history, as directors yesterday sought to bolster chairman Daniel Bouton ahead of a board meeting today.
However, the fate of SocGen star executive Jean-Pierre Mustier hangs in the balance.
The head of corporate and investment banking is to be questioned on what he knew of an alarm raised by Eurex, Europe's leading derivatives exchange, in November 2007.
"Our previous assumptions have to be questioned," said one director.
French president Nicolas Sarkozy has questioned the responsibility of SocGen directors. "I don't like to pass personal judgment on people, especially when they are in difficulty," Mr Sarkozy said, "but when you are well paid, which was doubtless legitimate, and there's a big problem, you cannot escape responsibility."
France warned foreign banks not to try to grab control of SocGen as speculation of a takeover approach by rival BNP Paribas drove its shares more than 10 per cent higher.
"The government is determined that Société Générale remains a great French bank," prime minister François Fillon told parliament.
"The government will not let Société Générale be the object of hostile raids by other companies," he said earlier.
SocGen yesterday admitted it had received letters from Eurex at the end of 2007 questioning Jérôme Kerviel's strategy. "We responded to this," the bank said.
Directors said the board supported Mr Bouton. He was critical to the success of the €5.5 billion rescue fundraising to be priced this week, one director said; the failure was not strategic.
"The banks who underwrote the fundraising told us they were doing it on the basis of Daniel's strategy," a director said.
Yet directors admitted Mr Bouton could go, with the board likely to split the roles of chairman and chief executive.
The scandal has sparked speculation that SocGen will soon be a bid target and the shares closed up 10.4 per cent at €78.45.
SocGen has accused Mr Kerviel, a relatively junior trader, of building up unauthorised positions on Europe's futures markets totalling €50 billion. The bank took a €4.9 billion loss as it closed the positions last week.
Mr Kerviel has revealed that he started manipulating SocGen's computer system two years ago, a year earlier than was thought.
He created fake trades to balance out risky, long-term futures positions so the bank's security system would not detect risk.
At the end of last year his unauthorised positions had virtually earned €1.4 billion - a figure so large, the trader told police, he had to balance it with fictitious losses to reduce it to a more credible €55 million.
"I cannot believe that my superiors did not realise the money I was committing [ to the illicit trades]. It was impossible to generate such profits with small positions," Mr Kerviel said, according to the police transcripts published yesterday in French media.
Mr Kerviel also faulted his superiors for not picking up on his failure to take holidays in 2007. "The simple fact that I didn't take holiday in 2007 should have alerted my managers.
"It is one of the first rules of internal controls. A trader who doesn't go on holiday is a trader who does not want to leave his book to someone else."
