The French government demanded a full accounting on Friday of how a rogue trader at Société Générale managed to lose $7.15 billion dollars, as it emerged he gambled on over $73 billion -- more than the bank's current value.
President Nicolas Sarkozy insisted meanwhile that the scandal, which cost the banking giant $7.15 billion, had not affected the "solidity and reliability of France's financial system."
Société Générale said a single Paris trader, named by bank sources as 31-year-old Jerome Kerviel, amassed the losses, virtually wiping out the bank's 2007 profit and leaving it as a potential takeover target.
Seeking to reassure investors and the public, Bank of France governor Christian Noyer insisted that Société Générale "is stronger today" after it had "cleaned" up its accounts.
But a top French presidential advisor revealed that Kerviel had positions of more than $73 billion -- more than the bank's current market capitalisation of €35.9 billion ($52.8 billion).
"Questions will have to be asked about the internal controls of the banking systems," Raymond Soubie told French television, saying it was "amazing" the trader was not caught.
The head of the European Central Bank, Jean-Claude Trichet, called for tighter self-regulation by banks after the scandal.
"The lesson to be drawn, as in the case of previous frauds of this magnitude (is the) absolute necessity of substantially reinforcing internal controls and internal risk controls in all establishments," Trichet told LCI television.
Prime Minister Francois Fillon demanded a finance ministry report within a week on the bank losses, the biggest of their kind in financial history, to decide on ways to avoid it happening again.
Société Générale has suspended its trader and filed a criminal complaint, but a source at the Paris prosecutors office said it was too early to say what charges, if any, he would face.
The scandal is a fresh blow to investor confidence as global banks reel from multi-billion dollar writedowns over the subprime crisis.
US media suggested the trader may have helped push the US Federal Reserve into an unprecedented rate cut on Tuesday.
"Was the Fed tricked?" wrote Wall Street Journal commentator David Gaffen, asking whether Société Générale 's high-volume sales of tainted positions at the start of the week -- when global stock markets were in turmoil -- helped set the stage for the Fed's emergency cut of 0.75 points.
The case dwarfs that of Nick Leeson, the British "rogue trader" who lost $1.5 billion at Barings, causing the failure of the venerable British bank in 1995.
Within a day of Société Générale 's announcement, France's "rogue trader" had become a cult figure on the Internet, his photograph plastered over newspaper front pages around the globe.
Seven groups are dedicated to him on the Facebook social networking site, one of them named "Jerome Kerviel should be awarded the Nobel Prize in Economics".
Described by work colleagues as a shy, hesitant character, Kerviel's resume depicts him a judo and sailing fan who once ran for municipal office in his hometown of Pont l'Abbe in Brittany, western France.
The trader's whereabouts were unknown, but his lawyer told AFP he was "not on the run."
Several police officers apparently entered Kerviel's apartment in a western Paris suburb on Friday after having a locksmith force open the lock, according to witnesses and an AFP journalist.
No official confirmation of a raid on Kerviel's residence was available late Friday from either police or prosecutors, and it was not clear from which service the police officers came from.
Many experts said it was difficult to believe a lone trader could have successfully hid such colossal losses.
"The feeling in the dealing rooms is that it is not possible for an individual to do all that. They think Société Générale has overdone the fraud to cover up some bad market operations," said Elie Cohen, an economy professor and research director for the National Centre for Scientific Research (CNRS).
Société Générale announced at the same time as the fraud that it had lost about $2 billion on its subprime exposure.
But the Bank of France governor said he was certain Société Générale had not sought to disguise losses made in the subprime mortgage crisis.
The scale of the losses slashed the bank's 2007 profit to €600-800 million from €5.2 billion ($7.64 billion) in 2006 and to seek €5.5 billion ($8.1 billion) in capital to restore its balance sheet.
Société Générale has fired the executives in charge of monitoring the operations, and union officials said its board would meet on Wednesday to assess the situation.
Shares in the bank rose by just over 1.5 per cent when Paris trading resumed -- recovering from a 4.14 per cent fall on Thursday -- but analysts warned it still risked becoming a takeover target. (AFP)