"It is a serious case, but at the same time it has nothing to do with the situation on the financial markets," Francois Fillon, speaking in Davos, Switzerland.
In addition to the fraud, however, SocGen unveiled a further writedown of 2.05 billion euros related to the credit crunch.
The Bank of France launched an investigation into the trades. The central bank's governor Christian Noyer said SocGen had been able to overcome the crisis because it was solid.
"Today we have seen that there was a glitch in the system that was exploited by someone who I think got round five successive risk control systems so who was without doubt a
genius of fraud," Noyer said.
The announcement sent a shiver through the world banking industry, which is suffering from the credit crunch as high-risk U.S. mortgage borrowers default on their loans.
Lehman Brothers CEO and Chairman Richard Fuld called it "everyone's worst nightmare" in a comment from the World Economic Forum in Davos.
Investors, wary of recent financial turmoil, were incredulous.
"We get the feeling that the financial markets have become a big casino which has lost control. It seems incredible that the Societe Generale can lose 5 billion through one operator," said
Alain Crouzat, a portfolio manager at Montsegur Finance.
SocGen accused the trader of taking "massive fraudulent" positions in 2007 and 2008 on European equity market indexes, meaning he was gambling on broad movements in share prices.
When the bank discovered the hidden trades on Jan. 19 and 20, it decided to close the positions in the market quickly.
But this coincided with a market rout, and the bank ended up nursing losses of 4.9 billion euros -- close to its net 2006 profit. SocGen said it expected a 2007 net profit of just 600 to
800 million euros.
The trader has been suspended and faces a formal sacking and and a legal complaint from Societe Generale, which is in turn already being sued by a group of 100 angry shareholders.
French police announced a criminal probe.
Like Leeson before him, the trader apparently benefited from knowledge of the bank's control systems after working in the back office of its trading rooms, according to SocGen.
It said he had used a "scheme of elaborate fictitious transactions" to try to cover up his mistakes, but did not accuse him of profiting personally from his actions.
"He was not one of our stars," said a senior board member.
Others said the crisis at SocGen, one of the top 10 banks in the eurozone by market value, could spell trouble elsewhere.
"The most serious thing is that this puts into doubt the risk-management systems at some banks," said Fortis analyst Carlos Garcia.
"You can't suddenly announce this from one day to the next a hit of $7 billion. In the light of this, what we've done is to downgrade banks that are very linked to trading income or whose
capital base is weak."
Analysts said the episode would have a major impact on the reputation of SocGen, which was founded in 1864.
Several said the bank, which has for years been coveted by larger French rival BNP Paribas, could face a battle to remain independent. Shares in BNP rose 7 percent.