The French government yesterday initiated moves to protect crisis-ridden Société Générale from a foreign takeover as shares in France's second-largest bank rose steeply on rumours of a pending merger with a domestic rival.

Playing the "economic patriotism" card, the prime minister, François Fillon, said: "The government is determined that SocGen remains a great French bank, a player in globalisation." He added that ministers would not allow the bank to be prey to "hostile raids by other companies".

Political observers said President Nicolas Sarkozy was trying to engineer an all-French merger behind the scenes to prevent what one of his closest advisers has called "the very substance of France's economy" being put at risk.

SocGen, facing losses of €4.9bn (£3.7bn) due to rogue trader Jérôme Kerviel, had lost half its value since June last year, and was worth €34bn. But its stock rose 10% on speculation that BNP Paribas would launch a bid at €92 a share.

BNP, which made an abortive bid for SocGen in 1999, refused to comment. But sources said the idea of an imminent bid was "fantasist" as others suggested BNP, prodded by Sarkozy, could be contemplating a takeover in the medium term. SocGen insiders insist that now, in the throes of a crisis, is the wrong time for a merger and this could take place only under political duress.

Analysts have linked BNP with SocGen's retail business and Crédit Agricole with its investment banking division, now severely damaged by Kerviel's €50bn gamble on stock futures. Others say a merger with BNP would mean thousands of job losses among SocGen's 130,000 staff - who Fillon has pledged to defend.

The government is thought likely to stay its hand until SocGen completes a €5.5bn capital raising to cover losses incurred when it unwound Kerviel's positions last week and an extra €2.05bn hit on its exposure to the US sub-prime crisis.

Daniel Bouton, SocGen's chairman, has offered to resign. Sarkozy and his ministers have made plain that he will have to go in any "rescue" and he could leave at a board meeting today. Directors are to discuss a report on the Kerviel scandal completed by external auditors yesterday.

"In a difficult moment, the board members are there to decide if the person in charge is the best placed to run the ship when it is pitching a bit, or whether they should change the captain," said Christine Lagarde, the finance minister.

It is widely thought that Philippe Citerne, co-chief executive, and Jean-Pierre Mustier, investment banking head, are so implicated by the evident lack of controls on traders such as Kerviel that neither could succeed Bouton. An outsider from within France's politico-commercial elite is viewed as the obvious solution.

Lagarde has summoned Christian Noyer, governor of the Bank of France, and Michel Prada, chairman of the AMF, the French financial markets authority, for an update on their investigations into how the SocGen scandal erupted.

Noyer, who chairs the banking commission, the main regulator, and Prada will be questioned by the French senate's financial committee this morning and are due to present their report to Lagarde on Monday. Fillon said he would immediately publish its findings in full.

Separately, the AMF said it had begun a formal inquiry into allegations of insider trading at SocGen before the bank disclosed its losses last Thursday. Both Adam, the minority shareholders' lobby, and lawyers acting for 100 small investors had called for investigations into share dealings by Robert Day, an American director on the SocGen board, which amounted to almost €100m on January 9 and 10.

The bank reiterated that neither Day nor any other person had knowledge of the losses when they sold their shares.

Kerviel's defence

Jérôme Kerviel, the 31-year-old rogue trader, has accused his superiors at SocGen of deliberately "turning a blind eye" to his mammoth operations in equity derivatives trading and of being part of a culture of fear.

Transcripts of his interrogation, carried out last weekend by the "brigade financière" and published last night by Le Monde and MediaPart on their websites, are a fresh blow to SocGen as Kerviel claims he was allowed to proceed as long as he made money.

The alleged loner, labelled a "fraudulent genius" and "demon hacker" by the bank's executives, was released on bail late on Monday after being charged with the lesser offences of breach of trust and forgery - and appeared to have gone to ground yesterday.

"I can't believe that my superiors were unaware of the amounts I was committing, it's impossible to generate such profits with small positions," he told the police after giving himself up on Saturday.

He claimed to have made a "profit" of €1.4bn (£1bn) by the end of 2007 but to have taken steps to conceal this and instead declare one of €55m in the hope of winning a €600,000 bonus. "As long as we are winning and that's not too obvious, that it fits in, one says nothing," he added.

Kerviel, who insisted his techniques of concealment were "not at all sophisticated" and should have been picked up by correct controls, sums up the bank's culture as "Not seen, not taken. If taken, you're hanged."

SocGen said it had improved its controls after being alerted to a "fishy" trade by Eurex, the derivatives market, in November 2007 and caught Kerviel out this month.