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France nabs trader over Caisse d'Epargne losses
2008-10-29
PARIS (AFP) - French police on Wednesday detained a trader from the Caisse d'Epargne bank for questioning over the loss of 750 million euros in derivatives trading amid this month's market turmoil, officials said. He was taken into custody as part of a preliminary investigation that seeks to determine whether anyone is criminally liable for the massive losses, racked up at the height of the global financial crisis. The probe by the Paris prosecutor's office could pave the way for charges of "abuse of trust" to be brought over the scandal, which forced the resignation of Caisse d'Epargne's two most senior executives. The bank has separately filed suit over the losses, saying an internal inquiry uncovered "troubling elements" that suggested just such an "abuse of trust" by its own staff. Caisse d'Epargne announced losses of 600 million euros on October 17 and has revised the figure upwards several times. It now puts its losses at 751 million euros (940 million dollars). Traders reportedly exceeded limits set on the amount of funds that could be risked at any one time in market plays. Finance Minister Christine Lagarde, furious the case undermined bids to restore confidence France's financial sector, said a banking commission inquiry found "serious deficiencies" in the control system at Caisse d'Epargne. The scandal revived memories of the disaster at another French bank, Societe Generale, which lost 4.9 billion euros in unauthorised deals allegedly made by junior trader Jerome Kerviel. The French government has insisted the country's major banks are all stable despite the international credit crunch and have in any case promised state aid to bail-out any failing institution and protect depositors. News of the loss came in the same week as directors of Caisse d'Epargne approved plans to open merger talks 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.
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