France's central bank sought to reassure depositors and investors that a 4.9 billion euro ($7.1 billion) fraud at Societe Generale was no threat either to the country's largest bank or to the broader financial system.
Bank of France governor Christian Noyer said SocGen's problems were down to a single genius of fraud and stressed that the bank was in a solid financial position after a capital increase of 5.5 billion euros to cover for the losses.
The bank is even safer and stronger than it was before, Noyer said after a news conference.
There is absolutely no problem from the point of view of all the clients, all the counterparties and all the savers. No risk at all.
He said SocGen had provided total clarity on its credit risk exposures and had taken the decision to unwind all of the fraudulent operations over the last three days despite the adverse market conditions.
The bank had been in a dangerous situation on Friday but had been cured, he said.
Noyer, who is also a governing council member of the European Central Bank, said he had been informed during the course of the weekend about the fraud.
He said the losses had ballooned because of poor market conditions that coincided with the bank unwinding its positions.
On Sunday it would have been absolutely impossible to have imagined such large losses, he said.
France's CAC 40 stock index fell around 9 percent from its open on Monday morning until the close on Wednesday.
Noyer said there was no link between the subprime crisis and the trading loss which was on positions taken during 2007 and this year on European equity indexes.
He said nobody could have foreseen the losses but stressed that risk controls at SocGen should have stopped the fraud.
Today we have seen there was a glitch in the system that was exploited by someone who I think got around five successive risk control systems, he said.
Noyer said the trader, who was in his 30s, had a good knowledge of internal bank controls and was no doubt a computer genius.
The central bank will open an inquiry into the causes of the loss and Noyer said all necessary steps would be taken when the findings were known, notably to strengthen internal controls.