Noyer, AMF detail SocGen action

PARIS (Reuters) - Following are highlights of testimony by Bank of France governor Christian Noyer and Michel Prada, president of France's market regulator, the Autorite des Marches Financiers (AMF), to the Senate finance committee about the troubles at French bank Societe Generale.

NOYER:

On conclusions:

"I cannot draw conclusions from an investigation that has only just begun."

"The first observations appear to tell me, and I speak with prudence, that all the permanent controls at Societe Generale do not seem to have worked as they should have. And those that did work were not followed in an appropriate fashion.

"At this point, until I have received a complete report, I cannot confirm or put into question the way in which the operations in questions were identified by management. But it is clear that we should concentrate on the reasons why these anomalies, the malfunctioning have not been spotted, analyzed ... treated or followed during this period. So this will be at the heart of our enquiry.

"What remains to be explained is how these illicit operations could have passed unnoticed by all the control systems and why and how there have been alerts that worked on these operations and yet they did not trigger a follow-up, an enquiry or any action."

On timing:

"I was alerted Sunday afternoon, as you have indicated, and I had a complete account of what happened Monday evening.

"I accepted on Sunday afternoon the principle of a rapid unwinding. It was already the decision of the chairman of Societe Generale"

"The objective of financial stability is clearly to protect the deposits of clients. This is the reason why I accepted what was decided by the chairman of Societe Generale, that is to say the rapid and secret unwinding of this operation."

On the potential risks

"The risk we faced was a colossal risk from the bank's point of view (he said if information about the rogue trades had been abruptly released it might have "panicked" the market and the bank's retail clients). Very precisely, this is the risk of sparking a systemic crisis.

"The mandate given to me is to protect above all savers and depositors. That is the objective of bank supervision, to avoid the risk of panic."

On bank inspections:

"We conduct inspections which are either inspections with a general objective, in more modest establishments, or inspections which focus on certain themes or certain sectors of the bank, which are taken, I wouldn't say randomly, but carefully and which allow (us) to conduct surveys."