FSA launches probe into Pernod swaps

The Financial Services Authority is investigating trades of Pernod credit default swaps.

In a sign it is delving into more opaque markets, the City watchdog is seeking information about CDS trades made by Calyon — the investment banking arm of French retail bank Crédit Agricole.

It is interested in trades made just before the French drinks company announced its �1billion (£869 million) restructuring in April, according to Financial News.

One credit derivatives banker said the FSA had been asked by an unnamed bank to investigate the market over suspicions an unusually large number of trades were made in the run-up to the announcement.

Sources at Deutsche Bank and JP Morgan, neither of which are the subject of the probe, said the banks were asked by the FSA to provide details of trading in Pernod CDS.

Deutsche, JP Morgan, the FSA and Pernod declined to comment as did Calyon.

It is thought that bankers got their fingers burned by trades in Pernod CDS before the firm's rights issue and restructuring.