Caisse d'Epargne Board May Oust Top Managers After Its Loss

By Anne-Sylvaine Chassany and Jacqueline Simmons

Oct. 19 (Bloomberg) -- The supervisory board of Groupe Caisse d'Epargne, France's third-biggest consumer banking network, may decide to oust some top managers when it meets today on a 600 million-euro ($807 million) trading loss.

The board will seek to assign responsibility for the loss among the five executives who form the bank's management committee, including Chairman Charles Milhaud, Chief Executive Officer Nicolas Merindol and Head of Finance and Risks Julien Carmona, three people familiar with the situation said today.

A proprietary trading team of about six people incurred the loss on equity derivatives after exceeding authorized limits on size and risk, a Paris-based official at customer-owned Caisse d'Epargne said Oct. 17. The latest banking turmoil in France comes about nine months after Societe Generale SA suffered a 4.9 billion-euro loss from unauthorized bets by trader Jerome Kerviel, prompting questions about its risk management.

``I feel responsible,'' Caisse d'Epargne's Milhaud was quoted as saying today by the French Sunday newspaper Journal du Dimanche. He said the management board's decision earlier this year to stop proprietary trading had not been implemented.

The mutual bank may issue a press release after the board meeting, which will take place at 3 p.m. in Paris, Christine Francoise, a spokeswoman for Caisse d'Epargne said today.

The three people with knowledge of the board's agenda declined to be identified because it is confidential. Milhaud, Merindol and Carmona couldn't be reached for comment after messages left for them with their communications officers Jacques Charbit and Francoise were not returned.

`Absence of Responsibility'

The supervisory board will draw the consequences from the loss, Milhaud said, adding that he was informed on Oct. 13 of a deficit of about 100 million euros.

``We were in effect exposed to much, much more,'' Milhaud was quoted as saying. ``It was urgent to unwind all these trades very rapidly.''

French Finance Minister Christine Lagarde has called for an inquiry, while French President Nicolas Sarkozy said the loss demonstrated an ``absence of responsibility'' at the bank.

In the Societe Generale case, trader Kerviel, 31, amassed 50 billion euros in trading positions, concealed with fake hedges. His eight-person desk wasn't allowed to have positions totaling more than 125 million euros. Investigations into the losses pointed to failures in the risk management and supervision at France's second-biggest bank by market value.

Milhaud today was quoted by JDD as saying that the internal control systems failed at Caisse d'Epargne. France's Central Bank, the country's bank regulator, is investigating the losses at Caisse d'Epargne.

On Oct. 8, Groupe Caisse d'Epargne and Groupe Banque Populaire, which jointly control Natixis, announced plans to merge in a move that would create a network of 8,200 branches in France, second to Credit Agricole SA, and 17.5 billion euros of combined revenue.

Milhaud was quoted as saying he aims to complete an agreement on the merger this year, and that he would like to play an ``active role'' in the new entity.

To contact the reporter on this story: Anne-Sylvaine Chassany in Paris achassany@bloomberg.net Jacqueline Simmons in Paris at jackiem@bloomberg.net;