A French court on Thursday ordered an investigation into IMF chief Christine Lagarde for alleged abuse of authority in her previous job as French finance minister.
Prosecutors want to probe her role in approving a 285-million-euro payment to businessman Bernard Tapie, a close friend of President Nicolas Sarkozy, in July 2008.
At the time, Tapie was in the midst of a court battle with the former state-owned bank Credit Lyonnais.
Lagarde denies any misconduct and there is no suggestion she profited personally from her decision.
The 55-year-old former corporate lawyer took over as managing director of the IMF from Dominique Strauss-Kahn last month, following his arrest in May on charges of attempting to rape a New York hotel maid.