French central bank governor Mr Jean-Claude Trichet has been ordered to face trial over misleading accounting by the Crédit Lyonnais bank, a move that could jeopardise his bid to become the next head of the European Central Bank (ECB).
Analysts said the trial cast doubt on the candidacy of Mr Trichet, widely tipped to replace ECB president Mr Wim Duisenberg when he resigns next July.
The trial is expected to begin in the second quarter of next year.
In Paris, a highly placed official source said France was standing by Mr Trichet as its candidate to succeed Mr Duisenberg.
An investigating magistrate ordered Mr Trichet on Monday to face trial, rejecting a prosecutor's argument that there was no case against the central bank head.
Mr Trichet was placed under investigation in April 2000 on suspicion of "spreading false information on the market and presenting and publishing inexact accounts" in the rescue of Crédit Lyonnais.
The bank started to collapse in the late 1980s as a result of ill-judged speculations, mismanagement and alleged fraud.
It had to be kept afloat by the government at a cost to the taxpayer of more than €15 billion. In 1992, Mr Trichet was treasury director at the French finance ministry, in charge of state-owned enterprises such as Crédit Lyonnais.
The trial order also covers former Bank of France governor Mr Jacques de Larosiere, a titan of world finance having served as International Monetary Fund director general and president of the European Bank for Reconstruction and Development.
The prosecutor has the right of appeal against the orders. The Bank of France, the French finance minister and the ECB declined to comment on the legal proceedings surrounding Mr Trichet, which sent shockwaves through international financial circles.
The prosecutor had argued that there was no case to answer against Mr Trichet, a member of the ECB governing council, who did not resign his bank functions on the grounds that he was innocent until proven guilty.
Also set for trial in the Crédit Lyonnais affair are the bank's former president, Mr Jean-Yves Haberer, and former managing director, Mr François Gille, said the judicial source.
An analyst at Dresdner Kleinwort Wasserstein, Ms Daniela Etschberger, said: "The whole succession issue looks uncertain again. There was consensus very early on that Mr Trichet would take over and he really would be the best man. There are no other real candidates and anyone else will simply be seen as second best."
Mr Trichet was placed under investigation in 2000 on suspicion that, when he was head of the French treasury, he had chosen to accept too readily financial information minimising the deepening problems of Crédit Lyonnais.
At the time Crédit Lyonnais was a French state bank, which had expanded rapidly abroad.
It became the biggest bank in Europe only to be brought to the verge of bankruptcy by the bursting of the property boom at the end of the 1980s and by misjudged investments.
When the ECB was created, France caused consternation in proposing Mr Trichet as a candidate to be the first ECB president, challenging Mr Duisenberg, who had been considered as the consensus choice. Since then, France has argued that there was a gentleman's agreement for Mr Duisenberg to stand down to make way for Mr Trichet.
- (AFP)
