The loss - combined with £1.53 billion in relation to losses and write-downs linked to the US sub-prime mortgage market - will force Societe Generale into a 5.5 billion euros (£4.1 billion) capital raising, to boost its balance sheet.

But Societe Generale stressed it would still make net income for 2007 of between 600 million and 800 million euros (£448 million to £597 million) despite the fraud.

It is thought that the Societe Generale trader behind the bank’s sensational losses is young and inexperienced.

He had been dealing in what are known as “plain vanilla” futures contracts linked to European indices - effectively betting on share movements.

Societe Generale boss Mr Bouton said he believed the trader was acting alone.

He said: “I don’t know the person and his motives are totally irrational.

“It doesn’t seem that he was able to benefit from these colossal trades and directly he did not, that is for sure, although investigations will have to be carried out.”

The group confirmed that four or five of the trader’s managers had resigned after the discovery at the weekend.
Societe Generale said it was just “bad luck” that the fraud was discovered amid this week’s market turbulence.

The unauthorised trades may even have returned gains if it had not been for the market losses, according to the group.

Mr Bouton said: “This is just bad luck, it’s Murphy’s Law. We discovered it at the same time as the markets plummeted.

“US markets went up last night and we were really unlucky, but we had to settle these positions as fast as we could and we did so during the three-day market crisis.”

The group claimed that its compliance procedures were not at fault, adding that it had increased its back office workforce by 50% to around 2,000 staff last year.

Mr Bouton dismissed similarities between the fall of Barings and its own fraud case.

“The future of the bank’s activities has not been affected and as a result there’s no macro-economic impact,” he said.

The Bank of France said there would be an inquiry by the Banking Commission, but declined to comment further.

The case comes less than six months after fellow French bank Credit Agricole unearthed unauthorised trading at its New York subsidiary, which cost the group 250 million euros (£187 million).

Societe Generale was founded more than 140 years ago and is France’s second largest bank by market value behind BNP Paribas.

It has a London office employing more than 2,000 staff.

Martin Slaney, head of derivatives at GFT Global Markets, said it was “staggering” that 4.9 billion euros worth of losses could be concealed.

“I’ve certainly never seen anything like this scandal before.

“The market is suspicious that such big trades could be hidden and potentially that there is something more sinister at play.”