SocGen boss survives and says bank can too

By Sudip Kar-Gupta and Julien Toyer

PARIS (Reuters) - Societe Generale fought off political pressure to sack its chairman on Wednesday after suffering the world's worst financial trading scandal, but the French bank failed to quash persistent takeover speculation.

The bank's board also said it had set up a special committee of independent directors to ensure that the cause and size of its rogue trading losses were fully accounted for.

The panel will be led by a Jean-Martin Folz, former head of French carmaker PSA Peugeot Citroen.

The bank has been in turmoil since revealing 4.9 billion euros ($7.3 billion) of losses, which it blames on rogue share trades by one 31-year-old junior employee, Jerome Kerviel. SocGen's board is keen to fight off potential predator BNP Paribas and asked executive chairman Daniel Bouton and his deputy Philippe Citerne to stay on through the crisis. But its shares rose for a second day on takeover speculation.

Bouton said SocGen was strong enough to stay independent.

Politicians from President Nicolas Sarkozy down have called for sweeping changes in the wake of scandal.

But in his first television interview on the crisis, Bouton said, "The board is asking to stay at the helm of the boat during this storm. I'm a man of duty. I'm not going to jump overboard when the board is asking me to stay to do my duty."

Asked whether he was now the head of a bank which could be taken over, he said "The strong determination of our customers, the strong determination of our staff, is offering an answer."

The bank's announcement that it was keeping its top people in place appeared to rebuff a demand from Sarkozy that the bank's leaders should face up to their responsibilities. A statement from the new committee said they had done exactly that, by offering to resign, yet staying on when asked.

French media said the decision to hand over the key internal inquiry to independent directors meant Bouton would now operate on a tight rein, something the aloof 57-year-old banker may not tolerate for long.

The 15-strong board has now twice backed Bouton, who offered to resign as soon as the bank uncovered the risky positions. Investors were surprised to see him still in place.

"I find this very extraordinary, said Dirk Thiels, head of global equity funds at KBC Asset Management.

"What we have seen at U.S. banks is that all the top people resigned when there were bad investments," he said.

"If a shareholder can't trust senior management to take responsibility for controlling the actions within an organization, who has to be responsible?" he added.

Kerviel, the trader at the centre of the scandal, was placed under formal investigation for breach of trust, computer abuse and falsification on Monday, but judges threw out a more serious accusation of attempted fraud.