(Xinhua)
Updated: 2008-01-25 14:48

DAVOS - The French prime minister said on Thursday that the fraud case at the French bank Societe Generale in which a rogue trader cost the institution 4.9 billion euros (US$7.18 billion) was not linked to the current unsteady financial market situation.

French Prime Minister Francois Fillon addresses a session of the World Economic Forum (WEF) in Davos January 24, 2008. [Agencies]

While describing it as a "a serious matter," Francois Fill on said at the World Economic Forum in Davos that the development has "nothing to do with the current situation on the global financial markets."

The junior trader, identified as Jerome Kerviel, 31, was accused of making unauthorized transactions and blamed for a record 7.18-billion-dollar loss in bad debts in one of the biggest frauds in financial history.

Trading in the bank's shares was suspended at the bank's request and stock closed 4.14 percent down on news of the fraud and a 2.05-billion-euro loss in the US subprime mortgage market.

The bank said the losses cut its 2007 profit to 600-800 million euros (US$880-1,170 million) from 5.2 billion euros (US$7.644 billion) in 2006.

Finance Minister Christine Lagarde said she had urged the country's banking regulator to bring in tougher controls in response to the scandal.

The scandal is the latest of its kind to strike the international finance industry.

Analysts said the situation reveals that banks, despite the carrying out of sophisticated risk management solutions, are still under threat. They worried that the incident could further affect the global finance sector and trigger heated discussion about strengthening supervision within the banking sector.

The trader had worked at Societe Generale in Paris since 2000 and earned a salary and bonus of less than 100,000 euros (US$145,700). After admitting to the fraud, he was dismissed along with his superiors, Societe General said.