IMF chief Christine Lagarde has been put under formal investigation by French magistrates for alleged negligence in a political fraud affair dating from 2008 when she was finance minister.
Ms Lagarde was questioned by magistrates in Paris this week for a fourth time under her existing status as a witness in the long-running saga over allegations that tycoon Bernard Tapie won a large arbitration payout due to his political connections.
"After three years of procedure, the sole surviving allegation is that through inadvertence or inattention I may have failed to intervene to block the arbitration that brought to an end the long-standing Tapie litigation," she said in a statement on Wednesday.
"I have instructed my lawyer to appeal this decision, which is without merit."
Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.
Lagarde's lawyer, Yves Repiquet, told Reuters that he would personally appeal the magistrates' decision.
That means Ms Lagarde would not have to return to Paris in the meantime, allowing her to continue her duties as managing director of the International Monetary Fund uninterrupted.
She is on her way back to Washington where she will brief the IMF board.
The inquiry relates to allegations that Tapie, a supporter of conservative former President Nicolas Sarkozy, was improperly awarded €403 million in an arbitration to settle a dispute with now defunct state-owned bank Credit Lyonnais.
The inquiry has already embroiled several of Sarkozy's cabinet members and France Telecom's chief executive, Stephane Richard, who was an aide to Lagarde when she was Sarkozy's finance minister.
In previous rounds of questioning, Lagarde had not recognised as her own the pre-printed signature to sign off on a document facilitating the payment.
However, Richard has stated that Lagarde was fully briefed on the matter.
The offence of negligence by a person charged with public responsibility in France carries a maximum penalty of one year's imprisonment and a €15,000 fine.