Two loss-making French banks, Banque Populaire and Caisse d’Epargne, have finalised details of their merger deal, which was announced last October.

The merged group will be France’s second biggest retail bank after Credit Agricole, with 34 million customers.
The new bank will be headed by Francois Perol, currently President Nicolas Sarkozy’s deputy chief of staff, a move that analysts say is controversial.

France’s government is to inject up to 5bn euros ($6.4bn) into the new bank.

A joint statement by the two banks said this would be done through non-voting preference shares and other instruments, giving the government a stake of up to 20%.

Caisse d’Epargne and Banque Populaire have been hit hard by losses at their investment banking subsidiary, Natixis.
Natixis said in December it could potentially lose up to 450m euros, as one of the victims of the alleged fraud involving Bernard Madoff.

Meanwhile, at the end of October, French police detained a trader for questioning over the loss of 751m euros at Caisse d’Epargne.

The bank’s top three executives resigned that month after the loss came to light. (Via BBC)