Page last updated at 12:00 GMT, Wednesday, 29 October 2008

Caisse d'Epargne trader is held

French bank Caisse d'Epargne
The trading incident caused a loss of 751m euros

French police have detained a trader for questioning over the loss of 751m euros (601m) at savings bank Caisse d'Epargne, judicial officials say.

He was taken into custody as part of an inquiry into whether anyone was criminally liable for the loss, made as a result of complex derivative trades.

The bank initially put the loss at 600m euros, but has since revised it upward.

The bank's top three executives have all resigned since the loss came to light earlier this month.

Chief executive Charles Milhaud stood down after saying he accepted full responsibility for the lost cash and is expected to leave without a pay-off.

The bank's director general and chief financial officer have also resigned.

Stock market bet

The loss was made public soon after the bank had set out plans to merge with another mutual bank, Banque Populaire.

Caisse d'Epargne bet that stock markets would rise, just as the financial uncertainty sent shares tumbling.

It has said the problems would not derail its planned merger with Banque Populaire, which would make it one of France's largest banks with 480bn euros in deposits.

The two banks together are the majority shareholders in the investment bank Natixis, which has been among the worst-hit in France by the US sub-prime mortgage crisis.

The multi-million euro loss at Caisse d'Epargne followed a 4.9bn euro loss at France's Societe Generale earlier this year. It came in the wake of a trading incident which SocGen blamed on trader Jerome Kerviel.

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