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Caisse d'Epargne bosses resign after record trading loss

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Latest update : 2008-10-20

Finance Minister Christine Lagarde has expressed her 'satisfaction' at the resignation without compensation of the chairman and director general of French bank Caisse d'Epargne following the loss of 600 million euros in a trading "incident".

The chairman and director general of the French bank Caisse d'Epargne quit Sunday over an 800 million dollar derivative 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 leaving payment.
   
The director general of the mutual bank also resigned and a bank source said its chief financial officer had tendered his resignation.
   
The bank said it lost 600 million euros (800 million dollars) in a derivatives trading "incident" on October 6 as world share markets were crashing over the global finance crisis. The bank was also entering merger talks with rival Banque Populaire.
   
There has been widespread government and public anger led by President Nicolas Sarkozy.
   
But Finance Minister Christine Lagarde was "satisfied" with the resignations, her staff said. But 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, has been 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.
   
Director-general Nicolas Merindol announced that he would leave his post and a bank source said chief financial officer Julien Carmona tendered his resignation.
   
Milhaud has confirmed that several employees, including the team of traders responsible for the blunder, had been fired.
   
Sarkozy assailed the losses from high-risk derivatives trading as "unacceptable" at a time when European governments were scrambling to shore up confidence in banking.
   
Milhaud made a public mea culpa in an interview with the Journal du Dimanche newspaper. "Yes I do feel responsible," he said. "Believe me, this incident is serious and is profoundly upsetting for me."
   
The scandal revived memories of the disaster at French bank, Societe Generale, which lost 4.9 billion euros in unauthorised deals made by junior trader Jerome Kerviel.
   
Milhaud told the Journal du Dimanche he first learned of a 100-million-euro loss on derivatives last Monday 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 foolproof 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 had been "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 has ordered the banking commission to conduct an audit of 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 has rolled out a 360-billion-euro bank rescue plan, offering loan guarantees and capital to avert bank collapses.
   
Caisse d'Epargne has 27 million account holders -- nearly half of all savers in France --- and employs 51,500 people.

Date created : 2008-10-20

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