Mr Jean-Claude Trichet, governor of the French central bank, said yesterday he was to be put under formal investigation for his role in the near bankruptcy in the early 1990s of Credit Lyonnais, then a state-owned bank.

The incident could undermine Mr Trichet's chances of succeeding Mr Wim Duisenberg as president of the European central bank in 2002, as agreed informally two years ago by European heads of state.

The announcement, involving one of Europe's most respected central bankers, casts a further shadow over the euro, which has fallen to all-time lows against the dollar in recent days, in spite of a favourable economic backdrop. The euro was trading at $0.9097 in late trade, above previous lows.

Mr Trichet's troubles are also an embarrassment for the French authorities, coming just a few months after Mr Dominique Strauss-Kahn, the popular socialist finance minister, was forced to resign for similar reasons. The two investigations have unearthed suspicions of corruption dating back to the Mitterrand presidency.

Mr Trichet, who is not formally charged but could face prosecution, will be interrogated by an investigating magistrate for his responsibility in the alleged "publication of false information to the markets and presentation of inaccurate accounts".

As director of the treasury between 1987 and 1993, Mr Trichet can be held legally responsible for potentially illegal activities conducted by Credit Lyonnais, which at the time owned Woodchester Investments in Ireland.

Credit Lyonnais flirted with bankruptcy after suffering huge losses linked to an expansion spree in the late 1980s and early 1990s. It was privatised last year, after being bailed out with state subsidies estimated at 100 billion French francs (€15.2 billion) by the French government and almost Ffr200 billion by the European Commission.

Until recently, Mr Lionel Jospin, the prime minister, had sought to distance himself from the corruption linked to socialist governments in the Mitterrand era.