Caisse d'Epargne loses EUR600m in derivatives "incident"
PARIS - French bank Caisse d'Epargne has announced it lost EUR600 million ($807 million) following what it called "a serious incident" in derivatives trading.
In a statement, the bank confirmed it had discovered through routine internal controls that a team of traders in its proprietary trading division had taken unauthorised positions. The losses were incurred as a result of recent volatility in the financial markets.
An official at the bank confirmed the team of half a dozen traders, along with a head of finance, have been suspended. The bank has begun an internal investigation into the incident.
The bank's president Charles Milhoud has taken full responsibility for the loss and has resigned without a pay-off. Chief executive officer Nicolas Merindol and chief financial officer Julien Carmona have also reportedly resigned under pressure from the incident.
French president Nicolas Sarkozy called the losses "unacceptable" and said the bank's leadership must face the consequences. French prime minister Christine Lagarde confirmed the loss had prompted a "special audit" for the country's banks. Caisse d'Epargne has assured investors its solvency and its current merger talks with Banque Populaire are not under threat.
This is France's second alleged rogue trading incident of 2008. On January 24, Societe Generale, France's second biggest bank, announced a trading loss of EUR4.9 billion on its delta-one equity derivatives desk.
The bank attributed the loss to the actions of a junior arbitrage trader, Jerome Kerviel, who allegedly took unauthorised positions and conducted fictitious trades.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
EBA seeks to allay Simm divergence concerns
EU validator pledges to co-ordinate with global regulators, but retains ability to act alone “if needed”
FRTB models find salvation in US Basel III proposal
Changes to P&L attribution test and NMRFs make IMA viable for US banks, risk managers say
US blows the floors off Basel III
Barr criticises “downward deviations” in US rule; Bowman rejects “blind adherence” to global standards
Basel III endgame – a timeline
A review of Risk.net’s coverage of the US implementation saga
Leaked EU plans offer extra temporary relief for FRTB models
Risk factors would need only two observations to be modellable. Do changes foreshadow US Basel III?
Iosco chief talks cyber, AI and clearing
Buenaventura discusses Iosco’s role in aiding market resilience and cross-border co-operation
US regulators bid to save FRTB IMA, but it’s no small task
Even if industry wish-list is granted, a 2028 start date might be too soon for model adoption
Hopes rise for cross-product netting under SA-CCR
Banks want rule change in Basel III endgame to lower capital costs of clearing UST repos