Four people are being held hostage by a man claiming to be an al-Qaeda operative in the French city of Toulouse -- just yards from where Islamic terrorist Mohammed Merah was shot dead by police.

At least one shot was heard soon after the man stormed a Credit Industrial and Commercial (CIC) bank branch at around 11 a.m. French time.

The director of the bank, a branch of CIC, is believed to be among the hostages, police said.  

France's BFM-TV said the man had asked to speak to the same elite police unit that shot Islamist gunman Mohamed Merah, who died in a hail of bullets just 100 yards from the scene of today's siege.

The regional newspaper Ouest-France says the area around the bank has been sealed off by the security forces.

We do not know if his claim about al-Qaeda is serious or a fantasy, a police union source told Ouest-France.

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 Merah, who went on a gun rampage earlier this year executing seven people, including Jewish children and three soldiers.

There are fears the hostage-taker wants revenge for the death of Merah and may be goading RAID officers into a shoot-out.

French authorities described Merah as an Islamic radical who had trained in Afghanistan and Pakistan.

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. Those were France's worst terrorist attacks in years.