PARIS (AFP) — French prosecutors on Monday announced a probe into how the Caisse d'Epargne bank lost more than 700 million euros in risky derivatives trading at the height of the global finance crisis.
The preliminary investigation launched on Friday "aims to determine the mechanism that led to the losses and establish possible criminal liabilities," the Paris prosecutor's office said.
It could pave the way for charges of "abuse of trust" to be brought in connection with the huge losses racked up by the bank's share derivatives traders from mid-September to early October.
Caisse d'Epargne, whose two most senior executives have resigned over the scandal, said Monday it has separately filed suit on the same count, saying an internal inquiry had uncovered "troubling elements" that suggested an "abuse of trust" by its own staff.
The bank 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.
According to the internal report seen by AFP, one trader ignored instructions given in April to unwind his positions, making a string of high-risk investments that went undetected by his superiors.
Finance Minister Christine Lagarde, furious that the losses undermined attempts to restore confidence in financial institutions battered by the global crisis, said a French banking commission inquiry found "serious deficiencies in the control system" at Caisse d'Epargne.
Paris prosecutors have asked the commission to hand over its file on the case with a view to deciding whether anyone should face formal charges.
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 that 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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