France stepped up efforts to restore confidence in the banking system as Societe Generale faced tough questions on Friday over why it failed to prevent the biggest financial dealing scandal in history.

Commenting for the first time, while on a trip to India, on the bank's $7 billion in rogue trading losses, President Nicolas Sarkozy called it a large scale internal fraud said it did not call into question the solidity of France's financial system.

Echoing reassurances from both government and central bank when the scandal broke on Thursday, Sarkozy said the losses do not affect the solidity and reliability of the French system.

Bank of France Governor Christian Noyer said in a radio interview Societe Generale's accounts were now clean after the bank moved to unwind positions built up by a lone trader under the noses of his supervisors.

Noyer dismissed speculation that some of the losses pinned on the trader were due to the ongoing global credit crisis, but hinted other French banks could announce writedowns linked to credit market losses when they report earnings.

We know exactly what the exposures are. The provisions have been announced or will be announced in the coming days, where necessary, Noyer told RTL radio.

In full page adverts in France's leading newspapers, Chairman Daniel Bouton apologized to SocGen shareholders as newspapers and analysts questioned whether a stay of execution granted him by the bank's board would last long.

Bouton offered to quit but was asked to stay on.

I understand perfectly your disappointment and see your anger. This situation is completely unacceptable, Bouton wrote.

SocGen shares rose 1.9 percent to 77.25 euros by 0924 GMT, valuing the bank at around 35 billion euros. They outpaced a firmer market after falling 4 percent on Thursday.

The shares have fallen around 20 percent this year due to long-standing rumors about its exposure to credit losses.

They have lost more than half their value since their 52-week high in April 2007.

Several analysts cut their recommendations for the bank.

Outside the cloistered world of European banking, global investors largely shrugged off the scandal. Asian stocks surged in the wake of a higher close on Wall Street after U.S. President George W. Bush and Congressional leaders agreed on an economic stimulus package to stave off a recession.

European stocks rose also, with the FTSEurofirst 300 index climbing 1.2 percent.

Antony Mak, a sales director at DBS Securities in Hong Kong, said markets viewed the dealing scandal as a one-off event.

It's isolated and the bank can sustain the damage by doing a placement. It's well contained, he said.


But French newspapers made for uncomfortable reading for SocGen executives aiming to repair the bank's reputation as home to some of the world's most complex rocket-science finance.

And the respected Financial Times Lex column coined a new name for France's second biggest bank -- ShockGen.

France's main business daily Les Echos said Bouton's position had been weakened and the bank -- the euro zone's 7th largest by value -- was now a potential takeover target.

SocGen staff were shocked and in waiting mode, one employee said in Hong Kong.

Rival bank BNP Paribas estimated that SocGen's trade exposure had been in the order of 33 billion euros and unions and a lawyer for small shareholders questioned whether the trader involved had been made a scapegoat.

The bank said a junior employee on its derivatives trading desk earning less than 100,000 euros a year had confessed to carrying out a sophisticated fraud, triggering 4.9 billion euros in losses as his disastrous trades were cancelled in wildly volatile markets. It said it did not know where the trader was.

Colleagues named him as Jerome Kerviel, 31, but SocGen declined to confirm this.

A lawyer, Elisabeth Meyer, who said she was acting for the missing trader, said in a television interview he had not run away and would talk to French police if asked.

Risk magazine named Societe Generale as Equity Derivatives House of the Year this month based on the bank's innovation, not on its ability to control traders, its editor told Reuters.