World financial crisis

French bank loses 600 million euros, as markets remain bumpy

Article published on the 2008-10-17 Latest update 2008-10-17 12:37 TU

A trader on the New York Stock Exchange
(Photo: Reuters)

One of France's largest banks, the Caisse d'Epargne, lost around 600 million euros in a derivatives trading "incident" during last week's market turmoil, the company said Friday in a statement. A major Chinese toymaker has laid off 7,000 workers and governments continue to try and protect their economies from the global turmoil.

"Because of the extreme volatility in the markets and the stock market crash of the week of 6 October, the Caisse d'Epargne group underwent a major incident in the derivatives market," the mutual bank said.

A company official said the financial director has been fired, and six members of the team which made the losing trades have been sanctioned.

It came in the same week as directors of Caisse d'Epargne approved plans to merge it with another company, Banque Populaire, and become France's second-largest retail bank.

France's Finance Minister Christine Lagarde today warned that hedge funds could be the next victims of the global crisis.

"They are vastly unregulated, they have been operating at the fringes, at the margin, and we need to be careful that there is no contamination effect," she said in a newspaper interview published today.

Chinese toymaker Smart Union, which supplied brands such as Mattel and Disney has gone bankrupt, putting up to 7,000 workers out of work. 

"The main reason for the closure is we are too dependent on the US market, which has become sluggish," Xu Xiaofang, an employee of the company told the China Daily newspaper. 

He added that rising labour costs, expensive raw materials and the appreciation of the Chinese currency, the yuan, contributed to the problem.

Among the latest measures taken by governments to stem the effects of the credit crunch on their economies, Malaysia issued a guarantee Thursday for all bank deposits until December 2010.

South Korea's central bank said it would revise currency swap market regulations to help local banks weather the crisis. The won has fallen some 40 per cent against the dollar this year.

In what is billed as Germany's biggest post-war rescue plan, the country's lower house of parliament, the Bundestag, on Friday approved a 480-billion euro package for its financial sector. It must now be approved by the upper house, the Bundesrat, before being signed into law by the president later in the day. 

Chancellor Angela Merkel unveiled the rescue plan at the beginning of the week and ensured it was fast-tracked through Parliament.  The main opposition Social Democrats joined the ruling Christian Democrats to vote in favour.

The package provides up to 80 billion euros in fresh capital for banks and 400 billion euros in guarantees in order to stimulate inter-bank lending. 

Markets in Asia and Europe remain volatile Friday.

Hong Kong share prices plunged 4.4 per cent on Friday. lndia's stock prices plummeted 5.73 percent, closing below the key 10,000-point level, their lowest in over two years.