SocGen Exec Valet's Exit Said to Be Part of Averting U.S. Curbs

(Bloomberg) -- The departure of Societe Generale SA’s deputy chief executive officer was part of an effort to settle a U.S. Justice Department investigation into the bank’s alleged manipulation of interest-rate benchmarks, people with direct knowledge of the matter said.

The exit was seen as necessary to help avert restrictions that could be placed on the lender’s U.S. businesses, one of the people said, requesting anonymity because the discussions are private.

Didier Valet, an 18-year veteran of the French bank, stepped down on March 14. On Monday, Societe Generale said it aims to resolve the U.S. probes into Libor, as well as a separate probe into alleged bribery in Libya, within weeks. Libor, short for the London interbank offered rate, helps determine mortgage and credit card rates.

U.S. prosecutors have collected documents suggesting that Societe Generale executives were aware that its bankers were submitting fake U.S. dollar Libor rates, Bloomberg News reported in November. The misleading number made bank borrowing costs look lower than they actually were.

U.S. and European investigations have focused on Libor rigging across the financial industry and have brought charges against more than a dozen bankers and brokers, levying more than $2 billion in U.S. criminal penalties. The allegations have rarely reached global banks’ management ranks.

‘Active Discussions’

A spokeswoman for the bank declined to comment on the reasons for Valet’s departure. Valet didn’t respond to requests for comment via LinkedIn. The Justice Department declined to comment.

The bank “has entered into a phase of more active discussions” with the U.S. Department of Justice and the Commodity Futures Trading Commission, according to a statement Monday. Last week, SocGen said Valet would be stepping down without severance pay after a “divergence of approaches” on a legal case, “in order to preserve the bank’s general interests.” It didn’t give more information.

About 1 billion euros ($1.2 billion) of the 2.3 billion euros the bank set aside for legal risks at the end of 2017 is allocated to the interest-rate and Libyan probes, SocGen said, adding that the financial impact of the disputes can’t be determined with certainty.

“It’s positive that the discussions are active again,” said Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods in London. “The issue is whether the implied 1.3 billion euros of reserves will be sufficient" to cover OFAC, he said.

A third probe in the U.S., one involving the Office of Foreign Assets Control, or OFAC, wasn’t mentioned in Monday’s statement.

Rate Submissions

The artificially low rates that resulted from SocGen’s submissions caused more than $170 million in harm to global financial markets, prosecutors said in a statement announcing the charges against two of its bankers. The alleged misconduct carried on into October 2011, when Valet was the chief financial officer, nearly a year after Libor manipulation was targeted by authorities at other banks.

Valet’s departure ends his steady ascent to the highest echelons of the bank. He joined the lender as an analyst almost two decades ago and was seen as a potential successor to CEO Frederic Oudea after being named as one of three deputy CEOs last year. Oudea last month said the goal was “to put these litigations behind us in the next weeks or months.”

U.S. Operation

In the U.S., SocGen’s businesses include trading, derivatives brokerage, investment banking and asset management. The bank, which opened its first U.S. office in 1938, employs about 2,500 people in North America.

It wouldn’t be the first time a top European lender has faced specific curbs on its activities in the U.S. BNP Paribas SA, France’s biggest bank, in 2014 was sanctioned with a yearlong U.S. ban on dollar clearing as part of its agreement to settle investigations for breaching sanctions against Iran, Cuba and Sudan. The bank was also fined $8.97 billion.

An indictment against SocGen filed in August against two lower-level employees of the bank shows that one of the bank employees warned about problematic rate submissions in an email to executives. At least one of them replied, according to the court documents, which didn’t identify the executives.

SocGen shares rose 0.5 percent to 45.43 euros at 4:50 p.m. in Paris. The stock is up about 5.5 percent this year, outperforming the Bloomberg Europe 500 Banks and Financial Services Index, which is down about 1.8 percent.

--With assistance from Geraldine Amiel Tom Schoenberg David S. Joachim and Jan-Henrik Förster

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Elisa Martinuzzi at emartinuzzi@bloomberg.net.

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