Bank recaps won't solve crisis: SocGen CEO

PARIS (Reuters) - A recapitalization of European banks is not needed and would not solve a crisis of confidence in the euro zone's ability to manage its sovereign debts, Societe Generale's chief executive told Reuters Insider TV on Friday.

Shares in France's second-largest bank have plunged nearly 50 percent over the last three months as concerns have grown about its financial strength, prompting it to announce a plan to cut costs and sell assets to free up 4 billion euros in capital.

Calling on euro zone leaders to sort out the unfolding Greek debt drama "as quickly as possible," Frederic Oudea said the main problem for banks was not one of capital but one of liquidity as funding-market confidence peels away.

"The main issue is a crisis of confidence in the sovereign...What is important is to deal with the Greek issue as quickly as possible and then rebuild confidence in the capacity of each bank in Europe to reduce its debt," he said at his offices at SocGen's Paris headquarters.

"My view is...the potential recapitalization will not sort out the issue of confidence in the sovereign debt."

Oudea's comments come even as the European Union's executive arm has begun preparing a plan for member states to coordinate a recapitalization of their banks and amid signs of a Franco-German split on how the euro zone's rescue fund could be used to do so.

Shares of SocGen were up 0.8 percent, at 20.86 euros, at 1414 GMT, about in line with the STOXX 600 bank index.

Although French government officials and bank chiefs have repeatedly denied French banks need more capital, rivals BNP Paribas and Credit Agricole have followed suit in targeting tens of billions of euros in asset sales apiece to slim down their balance sheets.

French banks have the largest overall exposure to Greece's debt-wracked economy, according to Bank for International Settlements data, but the 48-year-old CEO argued that the situation is "manageable" for all European banks including SocGen.

DEXIA NOT A DOMINO

Oudea, who rose to the top spot in the wake of a massive rogue trading scandal at the bank in 2008, praised the European Central Bank's decision on Thursday to renew one-year funding operations for banks and said that it would be adequate "for the time being," citing a time frame of "the coming months."

He also said that the measures would safeguard the euro banking system against another collapse in the vein of Franco-Belgian bank Dexia.

"Dexia had a specific business model...I think it's really a specific example," he said. "Going forward, with what the ECB has done, I think people should not expect further problems with the system. The liquidity will be provided to the banks."

Oudea reiterated previous statements that SocGen itself -- whose shares have lost about half their value in the past three months -- does not need capital. He insisted that its plan to sell billions of euros in assets would be enough to soothe market jitters.

Commenting on French Socialist candidates for the 2012 presidential elections saying they want to split banks' retail and investment banking arms, Oudea said: "One hundred per cent of the deposits of the French banks go and finance the French economy...(A split) is not a priority for the French banking system."

(Editing by Christian Plumb)

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