France tries to calm jitters on Societe Generale scam

Paris: France stepped up efforts to restore confidence in the banking system as Societe Generale faced tough questions yesterday over why it failed to prevent the biggest financial dealing scandal in history.

Commenting for the first time, while on a trip to India, on the bank's $7 billion in rogue trading losses, President Nicolas Sarkozy called it a "large scale internal fraud" and said it did not call into question the solidity of France's financial system.

Bank of France Governor Christian Noyer said in a radio interview Societe Generale's accounts were now clean after the bank moved to unwind positions built up by a lone trader under the noses of his supervisors.

Noyer dismissed speculation that some of the losses pinned on the trader were due to the ongoing global credit crisis, but hinted other French banks could announce writedowns linked to credit market losses when they report earnings.

"We know exactly what the exposures are. The provisions have been announced or will be announced in the coming days, where necessary," Noyer told RTL radio.

In full page adverts in France's leading newspapers, Chairman Daniel Bouton apologised to SocGen shareholders as newspapers and analysts questioned whether a stay of execution granted him by the bank's board would last long.

Bouton offered to quit but was asked to stay on.

"I understand perfectly your disappointment and see your anger. This situation is completely unacceptable," Bouton wrote.

SocGen shares rose 1.9 per cent to 77.25 euros by 0924 GMT, valuing the bank at around 35 billion euros. They outpaced a firmer market after falling four per cent on Thursday.

The shares have fallen around 20 per cent this year due to long-standing rumours about its exposure to credit losses.

They have lost more than half their value since their 52-week high in April 2007.

Several analysts cut their recommendations for the bank.