French bank chairman quits
The top two executives of Caisse d’Epargne quit Sunday over a EUR 600 million trading loss.
20 October 2008
PARIS -- The chairman and director general of the French bank Caisse d'Epargne quit Sunday over a EUR 600 million trading loss at the height of the global finance crisis.
Chairman Charles Milhaud said in a statement after an emergency supervisory board meeting that he was taking full responsibility for the loss and would not seek payment upon leaving.
The director general of the mutual bank also resigned and a bank source said its chief financial officer submit his resignation.
The bank said it lost EUR 600 million in a trading "incident" on 6 October as world markets were dropping over the global finance crisis. The bank was also entering merger talks with rival Banque Populaire.
There was widespread government and public anger led by President Nicolas Sarkozy.
But Finance Minister Christine Lagarde was "satisfied" with the resignations, her staff said. However, European Central Bank chief Jean-Claude Trichet said he was "shocked" by the loss which "proves that there is still immense progress to be made in managing risks" at banks.
Milhaud said in a written statement, "This loss is the result of the exceptional volatility of the markets during this period and the breach of instructions that the board and myself gave".
He added, "I accept entire responsibility, however. Having devoted my entire life to the Caisse d'Epargne, I have never at any moment considered trying to avoid my responsibilities".
"Those who know me know that I am not a man of money. I am not asking for any indemnity", he added.
Milhaud, 65, was in charge of the Caisse d'Epargne since 1999. He left the board meeting without commenting to journalists. Bernard Comolet, head of the bank's Paris region operations, was named as the new group chairman.
Milhaud confirmed that several employees, including the team of traders responsible for the blunder, were fired.
Sarkozy criticised the losses from high-risk trading as "unacceptable" at a time when European governments were struggling to support confidence in banking.
The scandal revived memories of the disaster at French bank, Societe Generale, which lost EUR 4.9 billion in unauthorised deals made by junior trader Jerome Kerviel.
Milhaud told the Journal du Dimanche he first learned of a EUR 100-million loss on 13 October and that he asked for the deals to be immediately unwound.
While the banker acknowledged that "some rules had been violated", he said tighter regulations were not the perfect answer.
"You can invent the best system on Earth, boost oversight and alerts, but you are still dealing with men and this entails risks", said Milhaud.
Sarkozy said there was "an absurd lack of responsibility". The hole in the bank's accounts are "enough so that those responsible should know they will bear the consequences".
Finance Minister Lagarde ordered the banking commission to examine the bank's trading activities.
News of the loss came in the same week as Caisse d'Epargne directors approved plans to start merger talks with Banque Populaire to form France's second-largest retail bank.
France developed a EUR 360 billion bank rescue plan, offering loan guarantees and capital to avoid bank collapses.
Caisse d'Epargne has 27 million account holders -- nearly half of all savers in France --- and employs 51,500 people.
[AFP / Expatica]