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.
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