PARIS, July 5 (Xinhua) -- The Banking Commission has imposed a fine of 4 million euros (about 6 million U.S. dollars) on Societe Generale, saying that "serious flaws in internal control systems" had led to a massive loss at the bank early this year.

    The maximum penalty that can be handed out by the commission could reach 5 million euros. The fine, which has been imposed on the French bank, "appears to be very severe," said a financial analyst shortly after the verdict was made public Friday.

    On January 24, the French bank, the country's second largest, had announced the discovery of fraudulent activities, emanating from Jerome Kerviel, one of its authorized traders, who had accumulated hidden positions covering a loss of 4.9 billion euros (about 7.5 billion U.S. dollars).

    The alleged offender at the heart of the mega financial, who has already earned himself the title of the "rogue trader" by the French media, has since been indicted for "forgery and use of forgeries," "breaking into data systems" and "abuse of trust."

    "The unmasked failures, in particular the lack of hierarchic controls, continued for a long period of time, notably throughout 2007, without the internal control systems helping to detect and correct it," the commission, which is in charge of overseeing operations in the banking sector, said in its final report.

    The commission also reported "serious deficiencies in internal control systems, which went beyond simple repeated individual failures," shortcomings that "formed a breeding ground for fraud, resulting in serious financial consequences."

    The report puts doubts on "monitoring and control systems at the top level," stressing particularly that "a detailed and daily monitoring" of the activities of Jerome Kerviel "was lacking."

    In addition, "the permanent control exercised by other departments of the bank was insufficiently sensitive to issues touching on fraud and embezzlement," said the report.

    According to the banking authority, "The differences detected several times in 2007" were " not met with in-depth investigations, even where explanations and justifications given by the trader (Jerome Kerviel) were abnormal or deficient."

    The commission further points an accusing finger at "flawed" information security systems at the bank, particularly with regard to computer-based systems, said the report, which also found out that the bank "had breached several key internal control provisions."

    "The fact that these shortcomings were not known to the management, which therefore could not take the remedial measures, cannot be used by the Societe Generale to exonerate itself from its responsibility under banking regulations," said the commission.

    Nevertheless, the commission also highlights the fact that the bank has "since the discovery of the fraud, made very substantial efforts to remedy identified weaknesses by taking both short term and structural measures."

    In a 71-page report published in mid-May, Societe Generale's internal auditors had blamed Kerviel's superiors and a "general environment," which ensured that his department failed to exercise real control over the operations on the trader.