Tensions have been higher than usual in Toulouse since March, when a gunman whom police said claimed links to al-Qaeda killed three Jewish schoolchildren, a rabbi and three paratroopers in the area.
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Those were France's worst terrorist attacks in years.
Thursday's hostage-taking began about 11 am (0900GMT) at a CIC bank branch in central Toulouse, a Toulouse police official said. The official said a single shot was fired but no injuries have been reported so far.
The official could not confirm the report on France's BFM television that the hostage-taker claimed ties to al-Qaeda. The official spoke on condition of anonymity because he wasn't authorized to speak to the media.
The neighborhood around the bank is cordoned off. Calls to the CIC bank branch went unanswered.
BFM also reported that four hostages were inside – the bank branch director and three others – and that the hostage-taker wanted the elite RAID police force to come negotiate with him.
The RAID police force led a 32-hour standoff with Frenchman Mohammed Merah, whom police say was behind the March shootings, in his Toulouse apartment. Merah was shot in the head in a gunfight at the end of the standoff.
French authorities described Merah as an Islamic radical who had trained in Afghanistan and Pakistan.