IMF boss Christine Lagarde faced a grilling Tuesday during the second day of her negligence trial over a payout authorised for a tycoon while she was French finance minister.

Presiding judge Martine Ract Madoux forced the head of the International Monetary Fund on the defensive as she questioned why 45 million euros had been paid to businessman Bernard Tapie in compensation.

The so-called "moral damages" were part of a 404 million euro settlement with Tapie in 2008 over a case he brought against the state. The IMF managing director could receive a maximum one-year prison sentence and a 15,000-euro fine if found guilty.

The case also threatens the credibility of the International Monetary Fund, as the former high-flying corporate lawyer is the third IMF chief to face trial. Lagarde strongly denies the charges.

Her line of defence on Tuesday was that she trusted guidance from her subordinates. She also said that she was out of the loop for some negotiations in the ministry and in the president's office.

She also recalled her busy international schedule and her "obsession" with the coming global financial crisis that would roil international markets later in the year.