By Lionel Laurent and Matthias Blamont

PARIS (Reuters) - Europe's legal framework to decide who pays if banks fail should avoid granting too much flexibility to individual EU member states, the head of French bank Societe Generale told Reuters on Wednesday.


EU states have been at odds on how to distribute the cost of shuttering banks. Germany favors strict norms across the EU on how losses would be spread across shareholders, bondholders and depositors.

Britain, Sweden and France want more flexibility. SocGen Chief Executive Frederic Oudea appeared to distance himself from the French government's position.

"There should not be too much flexibility," Oudea said in an interview on the sidelines of a finance conference.

"It is better to have the same rules of the game from one country to the next and that these rules be clear, understandable and applicable for both depositors and investors."

SocGen, France's second-largest listed bank, was among the lenders caught in the flare-up of the eurozone's sovereign-debt crisis in 2011. It has since cut jobs and sold assets to bolster its balance sheet and is eyeing an extra 900 million euros ($1.17 billion) in savings by 2015 to lift profits.

Despite the bleak picture for the eurozone economy, which remains mired in recession, Oudea said he did not think SocGen would need to cut costs more aggressively than planned.

The CEO also appeared to dismiss the idea of a sharp rise in loan-loss provisions in SocGen's home market, despite a jobless rate that is at 15-year highs and consumer belt-tightening.

"We are not seeing a rise in defaults," he said.


Commenting on the prospect of a pullback in central-bank liquidity and a rise in interest rates - the fear of which recently sent markets into a tailspin - Oudea said the overall picture was positive and that French banks wanted higher rates.

"What is happening is not unexpected - it shows that the U.S. economy is structurally better," he said. "For French banks it would be good."

Rising long-term interest rates allow banks to gain more from the difference between their short-term borrowing and long-term lending rates, although rising rates also hurt banks' bond portfolios.

Contrasting the recovery in the United States with the gloomier eurozone economy, Oudea said there was no need for extra liquidity from the European Central Bank but instead a focus on measures to get credit flowing in markets like Spain and Italy.

"Lending to small-to-medium-sized businesses is more a problem of (bank) capital than liquidity. I hope the banking union will be a way of answering this problem," he said.

Oudea, 49, took the reins of SocGen in 2009 in the wake of a trading scandal that cost the bank 4.9 billion euros.

Although SocGen has been the subject of frequent takeover rumors in the past, Oudea has pledged to grow without a merger by focusing on markets like Russia and Eastern Europe and by boosting capital-markets trading.

As both chairman and chief executive of the bank, he received a 75 percent increase in his bonus for 2012 even as profits fell by two-thirds.

He defended his pay by saying the main reason profits had fallen was because of an improvement in the bank's creditworthiness, which typically results in losses on the accounting value of a bank's own debt.

($1 = 0.7691 euros)

(Reporting by Lionel Laurent and Matthias Blamont; Additional reporting by Jamie McGeever; edting by Geert De Clercq and John Wallace)