The chances of Mr Jean-Claude Trichet, Banque de France governor, becoming president of the European Central Bank (ECB) increased markedly yesterday when a French prosecutor recommended dropping an investigation into his handling of a decade-old bank scandal.

Mr Trichet (59) has long been expected to succeed Mr Wim Duisenberg, the ECB president from the Netherlands, to fulfil what the French government insists was a deal to replace Mr Duisenberg with a French candidate halfway through his term.

But for the past two years the French judicial investigation over Mr Trichet's handling of Crédit Lyonnais has cast doubt on whether he would qualify for the job. Mr Duisenberg had been due to leave in the middle of this year, but in February he announced he would leave in July 2003.

Crédit Lyonnais, then a state-owned bank, faced collapse in the early 1990s after going on an ill-advised lending spree, and had to be rescued with taxpayers' money.

Mr Trichet was director of the French treasury at the time and is under formal investigation for overseeing "inaccurate company accounts".

Mr Trichet's supporters say he was not engaged in a cover-up but simply carrying out his duty as a civil servant to ensure the stability of the French banking system.

Crédit Lyonnais has since been privatised.

Mr Jean-Pierre Dintilhac, the prosecutor, recommended that the probe into Mr Trichet and some of his colleagues should be dropped, but that action should be pursued against others, including Mr Jean-Yves Haberer, who headed Crédit Lyonnais, and Mr Jacques de Larosiere, former Banque de France governor.

Mr Philippe Courroye, investigating magistrate, has the final say on whether to proceed with a trial but it would be an unusual step for the judge to reject the prosecutor's advice.

Mr Neville Hill, economist at Credit Suisse First Boston, said the decision left the door open for Mr Trichet to succeed Mr Duisenberg. "He's on the home run," said Mr Hill.

The ECB declined to comment last night. - (Financial Times Service)