Trader arrested for French bank losses
French police detain a Caisse d’Espargne trader suspected of losing EUR 750 million.
30 October 2008
PARIS - French police on Wednesday arrested a trader from the Caisse d'Epargne bank for the loss of EUR 750 million in trading, officials said.
He was arrested as part of an investigation to determine whether anyone is legally responsible for the losses.
The investigation by the Paris prosecutor's office could bring charges of "abuse of trust" over the scandal, which forced Caisse d'Epargne's two most senior executives to resign.
Police searched the home of the trader, who was hired by Caisse d'Epargne in 2001. The bank took steps to dismiss him, according to an informed source.
Caisse d'Epargne separately filed suit over its losses, saying an internal inquiry found "troubling elements" that suggested an "abuse of trust" by its own staff.
The bank announced losses of EUR 600 million on 17 October and revised the figure several times. It now puts its losses at EUR 751 million.
The trader exceeded limits set on the amount of funds that could be risked at any one time.
According to an internal report seen by AFP, the trader ignored instructions given in April to gradually cancel his market positions.
"Instead, from 15 September... he appears to have engaged in a risky strategy, acting upon his own initiative and for major sums," the report said.
Finance Minister Christine Lagarde, concerned that the case undermined attempts to restore confidence in France's financial sector, said a banking commission inquiry found "serious deficiencies" in the bank's controls.
The losses drew comparison with another French bank, Societe Generale, which lost EUR 4.9 billion in unauthorised deals allegedly made by a junior trader Jerome Kerviel.
The French government said the country's major banks are stable despite international credit reduction and promised state aid to help troubled banks and protect depositors.
News of the loss came in the same week as directors of Caisse d'Epargne approved plans to discuss a merger with Banque Populaire to form France's second-largest retail bank.
Caisse d'Epargne has 27 million account holders -- nearly half of all savers in France --- and employs 51,500 people.
[AFP / Expatica]