Ms Lagarde, who submitted a report on the case to the French prime minister on Monday, said the bank followed market rules in unwinding the trader's transactions. But she also urged greater controls on banks in France and worldwide.

In a bombshell announcement Jan 24, Societe Generale said that it had lost euro4.82 billion (S$10 billion) in cleaning up unauthorised transactions by trader Jerome Kerviel.

The bank says Kerviel overstepped his authority and bet euro50 billion (US$73 billion) - more than the bank's market value - on futures in European equity markets. Kerviel told investigators that his superiors had turned a blind eye to his activity, a claim the bank's lawyer called false.

Ms Lagarde's report did not assign blame but highlighted lessons to be learned from the scandal, which has deeply shaken France's banking sector and prompted speculation that Societe Generale could be bought out or broken up.

'Very clearly, certain mechanisms of internal controls of Societe Generale did not function, and those that functioned were not always followed by appropriate modifications,' she told reporters after submitting her report.

She said Societe Generale's management of the transactions was 'in conformity with the existing regulations'.

'The unwinding of the positions at the source of the loss on Jan 21, 22 and 23 was done in a professional way in difficult market conditions that could not be attributed to Societe Generale,' Ms Lagarde said in a statement.

The bank says the losses were so staggering because of bad timing: Just as it discovered Kerviel's activity and started closing his positions, world financial markets fell. Some have speculated the bank's actions in liquidating Kerviel's moves may have helped send stock markets down.

Ms Lagarde urged closer study of trading risks linked to human error or fraud and suggested tighter and more consistent banking controls.

'France will propose... that discussions at a European and international level be accelerated so that international standards can be applied to all the actors,' the report said.

The loss wiped out the bulk of SocGen's net profit for 2007 and brought pressure on its top executives to resign.

Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorised computer activity. -- AP