( L - R ) Kerviel, Bouton

Société Générale's CEO faced down mounting pressure for his resignation Wednesday over a trading scandal that cost billions, but his reprieve was swiftly followed by questions from the central bank about why operational "malfunctions" were ignored.

A day later, it emerged that Paris-based bank, BNS Paribas, was considering a bid for beleaguered SocGen, which last week reported losses of euro4.9 billion which it blamed on a rogue trader Jerome Kerviel.

If BNP Paribas follows through with a bid, it would be its second try at SocGen, which in 1999 had staved off a takeover bid by its rival.

Meantime, SocGen's board has rebuffed calls by French President Nicolas Sarkozy for top executives to face the "consequences" of the huge losses resulting from the unauthorised trading, giving Chairman and CEO Daniel Bouton and co-Chief Executive Philippe Citerne their universal backing.

Bouton had offered to resign as the trading crisis unfolded last week, when the bank said it had lost euro4.82 billion (US$7.09 billion) in unwinding trades by 31-year-old futures trader Jerome Kerviel. The board refused his offer.

"The board asked me to stay at the helm of the ship in the storm we are in," Bouton told France-2 television. "I am a man of duty. I am not going to jump overboard when the board asks me to stay and do my duty."

Fooled others

Questions have mounted, however, about how Kerviel could have fooled his superiors, and how Société Générale handled the discovery of his unauthorised transactions.

The bank's controls "didn't function like they should have" and "were not followed up appropriately," Bank of France chief Christian Noyer said at a hearing before the French Senate, reporting on initial investigations conducted last week.

Kerviel told investigators that he believes his bosses turned a blind eye to his questionable deals as long as he brought in money for the bank, according to excerpts published Tuesday by two media outlets that were verified by a prosecution official.

The bank's lawyer said Kerviel was lying, and its CEO insisted that the company's role was "to divide our risks ... never to expose ourselves to speculation of this type."

Secret actions

Both Noyer and Michel Prada, the head of France's financial market regulator, said they approved Bouton's decision to secretly unwind Kerviel's positions over three days before disclosing the record losses last Thursday.

Prada said Bouton "acted well," and shareholders "were protected from what could have been a major crisis."

Société Générale also announced it is setting up a committee to investigate what went wrong, with the help of auditing firm Pricewater-houseCoopers.

The committee will examine the causes and sizes of the trading losses and look into whether the bank accurately communicated information about the scandal.

Meanwhile, French radio and television reported that police searched the Paris apartment of Kerviel's older brother, Olivier Kerviel. Jerome Kerviel was released from police custody on Monday but barred from leaving France, and his whereabouts were unknown.

- Wire reports