French bank CEO risks millions
French Bank Caisse d'Epargne new general director Alain Lemerre addresses journalists in Paris after an emergency meeting of the supervisory board to decide what action to take after losses in derivatives trading in early October.
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Renita Jablonski: It's been almost a year since a rogue trader took a major French bank for millions. Well, it's happened again -- at another French financial institution, Caisse d'Epargne. This time, though, it's not an ambitious young back-office banker that's incurred the illegal losses. It's the head of the bank. Megan Williams reports.
Megan Williams: Two weeks ago, the head one of France's biggest bank was sure the markets were headed up. So sure that he and his trading team ignored the bank's own rules limiting risk and bet big.
Oops. Now the French Caisse d'Epargne is $800 million poorer, and CEO Charles Milhaud and chief officers are gone. Milhaud blamed the loss partly on what he called the "exceptional volatility" of the market, and didn't ask for departure compensation.
Economics expert Pieropaolo Benigno says it's another case of CEOs going after bigger bonuses.
Pieropaolo Benigno: Their bonus is usually related to the profits that they make. And the more they make profits, the more risk they take. And so these are the problems of incentives.
The news apparently won't affect Caisse d'Epargne's upcoming merger with another major bank. To help restore confidence in banks, France has ordered an audit of all of them.
I'm Megan Williams for Marketplace.