French prosecutors have opened a probe into how the Caisse d'Epargne bank lost 700 million euros in risky derivatives trading at the height of the global finance crisis, a judicial official said on Monday.
The preliminary investigation for "abuse of trust" could pave the way for criminal charges 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 has already said that an internal investigation revealed evidence of "abuse" by its own staff, who 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 that the losses undermined attempts to restore confidence in financial institutions battered by the global crisis, said a banking commission inquiry found "serious deficiencies in the control system" at Caisse d'Epargne. The bank's two most senior executives resigned in the wake of the scandal. Now, Paris prosecutors have asked the French banking commission to hand over its file on the case with a view to deciding whether anyone should face formal charges, the judicial official told AFP.
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.