PARIS — French bank Societe Generale said yesterday it has uncovered a $7.14 billion fraud — one of history's biggest — by a rogue trader whose scheme of fictitious transactions was discovered as stock markets began to stumble in recent days.

The alleged fraud by Jerome Kerviel, 31, staggered Societe Generale, France's second-largest bank.

Its disclosure dealt a new blow to a European banking industry already reeling from losses on U.S. subprime mortgage securities — including a $3 billion writedown announced yesterday by Societe Generale itself.

CEO Daniel Bouton said the junior employee's motivations were "irrational," netting the trader no personal financial gains. Still, the bank is seeking to have him prosecuted in court.

The bombshell destabilized a major bank already hit by the subprime mortgage crisis. France's second-largest bank by market value said it will be forced to seek $8.02 billion in new capital.

Societe Generale's shares, which have lost nearly half their value over the past six months, were suspended in Paris yesterday morning, then dropped 5.5 percent to $108.97 when they resumed trading.

The bank said it detected the fraud — comparable to a full year of its profits in stable times — at its French markets division the weekend of Jan. 19-20.

Bouton said the bank alerted regulators and moved immediately to close the trader's positions, incurring heavy losses amid sharp declines on world markets.

"This is a bad time for banks and the industry in general. But detecting the fraud over the weekend was problematic because world stock markets on Monday and Tuesday fell hugely around the world. When the positions had to be unwound, the bank did that in a terrible market of falling equities," said Janine Dow, senior director at Fitch Ratings.

The man admitted to the fraud, the bank said, and was being dismissed.

Four or five of his supervisors are to leave the group. Bouton offered to resign but the board rejected that.