French bank Societe Generale is suing the Mail on Sunday for what could be huge damages over a story which it says led investors to fear it was in danger of imminent collapse.
One investor threatened to move assets worth â‚¬5.45m as a direct result of the story despite an apology in the paper, a High Court claim says.
The Mail on Sunday ran a story headed: ‘France and Italy stand by to bail out biggest banks’on 7 August, 2011.
The story alleged that that Societe Generale was in a dire financial position so grave that without help from the French government it would collapse into insolvency, the claim says.
Two days later the Mail on Sunday carried an apology on its website but Societe Generale says it was hard to find, not immediately apparent, and that no apology or retraction appeared in the newspaper. The bank says it suffered substantial damage to its reputation, and prejudice to its trade, despite the apology, which was not effective.
Since the story appeared the bank says its senior management and communications teams in Paris and London have spent considerable time dealing with the impact of the story.
Its chief executive and deputy chief executive had to appear on television and give interviews to allay fears of its imminent collapse, and had to write to retail and private banking clients justifying its liquidity, the claim says.
The bank’s share price has suffered larger falls on the stock market than other major French banks, its credit default swap level has increased, other articles have been published generating negative publicity for the bank, and a memo has been sent to clients and trading partners explaining the story was false, the court will hear.
Investment companies and private banks temporarily stopped trading with Societe Generale, citing loss of confidence, banking division SG Hambros faced a high volume of withdrawals and transfers, and had to deal with hundreds of calls from clients. Its French retail banking division had to hold detailed discussions with clients, and SG Private Banking faced more withdrawals than expected.
The Mail on Sunday made no effort to get in touch with Societe General before publication to check the state of the bank’s solvency, which is information in the public domain, the claim says.
The bank is seeking damages to reflect lost business which specific trade is proved to have been lost as a result of the words, and says it has two instances of this.
It also wants the cost of mitigating the damage, including the cost of engaging PR consultants, distributing material to counter the words, dealing with regulatory authorities, and customer inquiries, and damages to reflect the cost of requests by customers, for example moving investments into alternative products, as a result of the worlds.