A Paris court on Tuesday freed Jerome Kerviel, the trader accused of causing record losses at French bank Société Générale, pending investigation, his lawyers said.
Société Générale unveiled €4,9-billion ($7,64-billion) of losses in January in the biggest trading scandal in recent history, which it said was caused by rogue deals carried out by Kerviel, a junior trader at the bank.
The bank was already facing losses from the subprime mortgage crisis in the United States that has claimed some big-name scalps, most recently Bear Stearns.
”I am very happy for Jerome,” said Elisabeth Meyer, one of his lawyers.
Kerviel (31) is under formal investigation for breach of trust, computer abuse and falsification and has been held in Paris’s La Sante prison since February.
Kerviel’s lawyers asked for him to be released while prosecutors say he should remain in custody.
Société Générale has carried out an internal investigation into the Kerviel affair. Its report, published on February 20, supported the bank’s previously expressed view that Kerviel acted alone.
The report reiterated that Kerviel started building up unauthorised trading positions in 2005 and 2006 for ”small amounts”, but they got bigger from March 2007 onwards.
By the time the bank discovered what was going on in late January, Kerviel had amassed a position worth €49-billion, which Société Générale unwound between January 21 and 23 in an already falling stock market.
Société Générale’s losses have made it vulnerable to a takeover bid. France’s biggest listed bank, BNP Paribas, has said it is looking at Société Générale. In 1999, BNP narrowly failed to buy its rival.
The bank has also come under pressure from leading politicians and regulators.
Bank of France Governor Christian Noyer criticised Société Générale’s risk-control systems and French President Nicolas Sarkozy has made clear he thinks that chairperson Daniel Bouton should quit.
Bouton has said he has a mandate from the board to keep his job and continue with the bank’s standalone strategy. – Reuters