Caisse d'Epargne lost €751M in unauthorized derivatives — and the CEO resigned

In October 2008, Groupe Caisse d'Epargne, one of France's largest banking groups, announced that its traders had conducted unauthorized derivatives transactions that resulted in a loss of €751 million (approximately $1 billion at the time). The loss came at the worst possible moment — the global financial crisis was in full swing, and the bank was already under pressure from its exposure to the Madoff scandal through its subsidiary Natixis.

The bank blamed the loss partly on extreme market volatility, but the core failure was internal: traders had exceeded their risk limits and the bank's risk controls had not caught the unauthorized positions until the damage was done. The employees responsible for the unauthorized trades were dismissed. The bank's CEO Nicolas Mérindol and chairman Charles Milhaud resigned on October 19, 2008, just days after the loss was announced.

The scandal accelerated the merger of Groupe Caisse d'Epargne with Groupe Banque Populaire, which was announced in October 2008 and completed in July 2009, creating BPCE, France's second-largest bank. The loss was smaller than the €4.9 billion rogue trading scandal at Société Générale earlier that year, but it highlighted the same fundamental weakness: French banks' risk controls were not keeping pace with the complexity of their derivatives operations.