It seemed the world was overdue for a rogue trader saga and Crédit Agricole has stepped in, announcing Tuesday evening it will suffer a €250m ($348m) hit to Q3 profits at Calyon, its investment banking unit, after rogue traders in its New York office built up a massive unauthorised credit position.”In the context of a more turbulent trading environment in September, contrary to July and August, Calyon’s third-quarter net result is likely to come in significantly below that of the same period in 2007 but nonetheless remain in profit,” the statement said.

Calyon’s first-half net income was €997m, up 8 per cent from a year earlier, the bank said at the end of August, reports the FT. The news came after Tuesday’s markets close.

In the statement, Calyon said the French bank’s senior management was notified on the evening of September 4 of an unusually large trading position on the books of the proprietary trading desk in its New York office.

It is thought that risk managers became aware of the position on returning to work after the Labor Day holiday and immediately notified senior management.

The bank said the trading position was in diversified credit indices and it had no relation to the subprime mortgage markets. The position had, to a large extent, been built during the last days of August “above the authorised limit and without the authority to engage the bank at the level of this trade”, it said.

The most commonly traded credit indices are those for credit default swaps, which provide a kind of insurance against non-payment of corporate debt and are widely used to make bets on the health of corporate debt markets as a whole, says the FT.

The bank said that the position had been “brought back within the normal trading activities of Calyon” and added that the trading limit alert and security controls had been strengthened in an effort to prevent the recurrence of such an incident.

Calyon said the key trader involved, an unnamed American man, had been sacked, adding that disciplinary action was also being taken against other members of staff – it was understood that six Calyon employees were likely to be disciplined over the affair.

However, The Times reports that a total of six traders who built up the position were immediately dismissed, although Calyon declined to comment.

The discovery follows a change in personnel at the top of Calyon, notes the FT. Georges Pauget, chief executive of Crédit Agricole, was in May also named chairman of the investment bank, replacing Jean Laurent.
Meanwhile, Marc Litzler, previously deputy chief executive of Calyon, was recently named chief executive.