Written by Hilary Barnes

In 2011 a French blogger, Jean-Pierre Chevallier, published an analysis of a statement by Societe Generale (SocGen) in which he explained that the ratio of the bank's total debt, or liabilities, was 50 times its equity capital.

The bank stated its equity capital ratio to debt as 9.3%, which is to say that debt was around 10 times equity capital.

Needless to say, no one can put a finger on Societe Generale; It's statement of the equity capital ratio was made in accordance with all the rules and regulations that apply to banks, with big or small.

As everyone who has ever read a business newspaper, not to mention blogs, the rules give the banks considerable leeway when calculating equity capital.

The ratio is calculated against "risk weighted assets" - like: Greek government debt is (was) "risk-free".

Just how big the variations are between how individual banks weigh their risks rarely becomes public knowledge unless they go bankrupt, or when a bank is taken over and the new owners write off large sums that the other bank had long rated as carrying only a low risk.

This is the stuff of which independent analysis of the banks is made, whether by bloggers, journalists or investors and their advisers.

But Societe Generale was not happy with Jean Pierre Chevallier's blog and lodged a complaint with the the French financial market supervisory authority, Autorité des marchés financiers (AFM), and the AMF has now astonished Mr Chevallier and a lot of others, including this blogger, by upholding the complaint and fining Jean-Pierre Chevallier €10,000 for publishing "inexact" information which might influence the share price.

Mr Chevalier intends to appeal against the AFM verdict and says he is also planning to sue the AFP for making false and defamatory accusations against him:

("j'engagerai des procédures contre les accusations fallacieuses et diffamatoires de leur part à mon encontre.")

This statement is made, he points out, on a blog with a Swiss address, Chevalier.biz, as, he says, he has no confidence in French institutions.

That, however, will not offer him much protection.

The AMF has also fined Mike Shedlock €8,000, of Mish's Global Trend Analysis, published in the USA, for the same offence against Societe General. Shedlock reported the Chevallier analysis.

Reference: