SocGen board rejects CEO resignation

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Securities trader Jerome Kerviel out of jail but facing charges in $7-bil French bank fraud case. Jim Bittermann reports Play video

PARIS (CNN) -- The board of troubled French banking giant Societe Generale said Wednesday that Chairman and Chief Executive Daniel Bouton will stay on despite massive trading losses of more than $7.2 billion.

The board said it rejected Bouton's resignation, as well as that of co-Chief Executive Phillipe Citerne, his second-in-command.

The announcement came at the end of a special board meeting at Societe Generale's headquarters in the Paris suburb of Neuilly-sur-Seine to discuss the losses, which Bouton has attributed to fraud by one of the bank's traders.

Jerome Kerviel, who traded European index futures, was charged Tuesday for his role in the $7.2 billion loss, though he has not been charged with fraud.

Wednesday was the second time this week that Bouton offered his resignation and the second time the board rejected it.

Boardmembers also announced the creation of a special committee to look into the causes and extent of the losses the bank incurred. In addition to the alleged fraud, the bank last week also announced a nearly-$3 billion writedown due to the U.S. subprime mortgage crisis.

The special committee will include independent directors, the board said, and will look into measures that have been put in place to prevent a recurrence. The committee will call on the audit services of PricewaterhouseCoopers, the board said.

Other problems facing the board are a lawsuit from a group of shareholders and an investigation by the French banking regulatory agency.

As the board was meeting Wednesday, employees of Societe Generale stood in front of the headquarters to defend the company and lend their support to Bouton.

"We support him, we completely trust him," said one employee, who didn't give a name.

"We need him to help us get out of this," said another. "I think there is no other guy able to help Societe Generale get out of this impasse."

Among those who disagree are French President Nicolas Sarkozy and his finance minister, Christine Lagarde. Sarkozy this week urged the bank's board to "assume their responsibilities," indicating he wanted Bouton to go.

The problems have led Societe Generale's stock price to drop, leading to speculation of a buyout by other banks.

Paris Prosecutor Jean-Claude Marin has said he will continue to pursue fraud charges against Kerviel, who was charged Tuesday with abuse of confidence and illegal access to computers.

Kerviel is free under judicial control but faces a maximum of three years in prison for abuse of confidence.

Marin and the bank have said they believe Kerviel acted alone in accumulating the huge losses, though Kerviel has said he was not the only trader taking out large, risky bets on the markets.