BNP Paribas Rides Away from SoGen Rescue

(MoneyWatch)  You know things are bad when even the calvary gets scared. BNP Paribas is backing out of its potential merger with Societe Generale, the troubled French financial giant walloped by an errant trader who racked up $7 billion in losses earlier this year. In an announcement, BNP said,

"Given the persistent rumours, BNP Paribas clarifies that it has ceased to consider a potential tie up with Société Générale. It believes that the conditions, which would have allowed it to realise a shareholder value creating merger, are not met.

"In the current environment, BNP Paribas' priority is to recognise and play to its strengths: stringent risk management, solid financial structure, commercial efficiency, diversification of revenue sources."

The statement also emphasized BNP's "strong capital position" but didn't say how threatened that would be by mingling its assets with those of Societe Generale. BNP tried and failed to buy Societe Generale back in 1999. How the roles have reversed since then.

Societe Generale doesn't have any other white knights waiting in the wings. Its predicament isn't likely to cause a repeat of the Bear Stearns turmoil in Europe, but it does underscore the sense of financial paranoia that originated in the U.S. markets has the potential to move abroad.