PARIS, Oct 19 (Reuters) - The supervisory board of French bank Caisse d'Epargne, which disclosed a 600 million euro trading loss on Friday, met on Sunday to discuss the future of the bank's management, a source said.
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.'
'The question of confidence in the board of directors will be asked at the meeting of the supervisory board,' a source close to the bank told Reuters.
'The examination of the situation that has arisen from the trading loss and the sanctions which have already been taken are also on the agenda,' the source added.
The meeting started at 1300 GMT.
The board's president is Charles Milhaud and it includes Nicolas Merindol, the chief executive officer, Julien Carmona, the finance director, Guy Cotret, human resources, and Alain Lacroix, who is responsible for development.
Milhaud, who has been at the bank for 45 years, told the Journal du Dimanche newspaper he felt responsible for the incident.
Asked if he would resign, he said the supervisory board would 'examine all the consequences that should be drawn from this affair.'
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.
Milhaud said he had found out on Monday that derivatives operations had caused a loss of around 100 million euros and that the bank was exposed to much larger losses.
'We urgently had to unwind all these operations very quickly. That's what we did, ending up with a loss of 600 million euros,' he said.
MERGER
The savings bank, which is merging with Banque Populaire, has said the 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, France's second-biggest listed bank, and blamed on junior dealer Jerome Kerviel.
Milhaud said it was 'not a new Kerviel affair' but said internal controls should have flagged the loss earlier.
But he said those who should have spotted the problem were concentrating on the merger with Banque Populaire, which Milhaud said he hoped would be completed before the end of the year.
Both Caisse d'Epargne and Banque Populaire have said the loss would not affect their tie-up.
Credit rating agency Standard & Poor's said the trading loss would increase 'negative pressure' on its ratings for Caisse d'Epargne. It currently has a AA- rating on the bank, and recently cut its outlook to 'negative' from 'stable.'
Caisse d'Epargne and Banque Populaire own 70 percent of investment bank Natixis which was hit hard by the credit crisis and needed a capital increase to boost its solvency ratio.
The merger, announced on Oct. 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.
(Editing by Will Waterman and Bernard Orr) ($1=.7458 Euro) Keywords: CAISSEDEPARGNE/ tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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.'
'The question of confidence in the board of directors will be asked at the meeting of the supervisory board,' a source close to the bank told Reuters.
'The examination of the situation that has arisen from the trading loss and the sanctions which have already been taken are also on the agenda,' the source added.
The meeting started at 1300 GMT.
The board's president is Charles Milhaud and it includes Nicolas Merindol, the chief executive officer, Julien Carmona, the finance director, Guy Cotret, human resources, and Alain Lacroix, who is responsible for development.
Milhaud, who has been at the bank for 45 years, told the Journal du Dimanche newspaper he felt responsible for the incident.
Asked if he would resign, he said the supervisory board would 'examine all the consequences that should be drawn from this affair.'
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.
Milhaud said he had found out on Monday that derivatives operations had caused a loss of around 100 million euros and that the bank was exposed to much larger losses.
'We urgently had to unwind all these operations very quickly. That's what we did, ending up with a loss of 600 million euros,' he said.
MERGER
The savings bank, which is merging with Banque Populaire, has said the 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, France's second-biggest listed bank, and blamed on junior dealer Jerome Kerviel.
Milhaud said it was 'not a new Kerviel affair' but said internal controls should have flagged the loss earlier.
But he said those who should have spotted the problem were concentrating on the merger with Banque Populaire, which Milhaud said he hoped would be completed before the end of the year.
Both Caisse d'Epargne and Banque Populaire have said the loss would not affect their tie-up.
Credit rating agency Standard & Poor's said the trading loss would increase 'negative pressure' on its ratings for Caisse d'Epargne. It currently has a AA- rating on the bank, and recently cut its outlook to 'negative' from 'stable.'
Caisse d'Epargne and Banque Populaire own 70 percent of investment bank Natixis which was hit hard by the credit crisis and needed a capital increase to boost its solvency ratio.
The merger, announced on Oct. 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.
(Editing by Will Waterman and Bernard Orr) ($1=.7458 Euro) Keywords: CAISSEDEPARGNE/ tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.