October 19, 2008 / 8:57 PM / 10 years ago

Caisse d'Epargne chairman resigns after trading loss

PARIS (Reuters) - The chairman of Groupe Caisse d’Epargne resigned on Sunday, following a 600 million euro ($808 million) trading loss at the French mutual bank which drew the anger of France’s President and Economy Minister.

“I accept full responsibility,” Chairman Charles Milhaud said in a statement.

French business TV station BFM and other media also reported that chief executive Nicolas Merindol and finance head Julien Carmona had also resigned.

A spokesman for Caisse d’Epargne said he was not in a position to confirm those resignations.

Last week Caisse d’Epargne, which is planning to merge with Banque Populaire, revealed the trading loss which occurred due to a small team of traders making a disastrous bet on the stock markets.

The loss prompted Economy Minister Christine Lagarde to ask for a special audit of all banking institutions in France, and President Nicolas Sarkozy called the situation “unacceptable.”

European Central Bank President Jean-Claude Trichet said he was shocked by the losses at the bank.

“When we know who is responsible, we must obviously draw conclusions,” he said on RTL radio.

MERGER

Milhaud is the latest scalp claimed by the global credit crunch. In Britain, Royal Bank of Scotland (RBS.L) chief executive Fred Goodwin was ousted after the British government part-nationalized the bank following huge writedowns on structured products.

The former heads of Franco-Belgian bank Dexia DEXI.PA were also ousted following a bailout package by the governments of France, Belgium and Luxembourg.

Caisse d’Epargne said the trading loss was caused by a “small team” that had been punished for exceeding its trading risk limit.

The incident was reminiscent of a 4.9 billion euro loss announced in January by Societe Generale (SOGN.PA), France’s second-biggest listed bank, and blamed on junior dealer Jerome Kerviel.

Both Caisse d’Epargne and Banque Populaire have said the loss would not affect their tie-up.

The merger, announced on October 8, will likely create France’s second-biggest retail bank after Credit Agricole (CAGR.PA).

Banque Populaire and Caisse d’Epargne said last week the new group would have assets of 40 billion euros and 480 billion of savings and deposits.

Caisse d’Epargne and Banque Populaire own 70 percent of investment bank Natixis (CNAT.PA), which has also been hit hard by the credit crisis and needed a capital increase to boost its solvency ratio.

Natixis shares, which closed up 1.9 percent on Friday, have fallen around 76 percent since the start of the year, making it France’s worst performing bank stock.

(Additional reporting by Matthieu Protard)

Editing by Will Waterman and Bernard Orr

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