PARIS (AP) — French bank Societe Generale SA hopes to raise nearly $8 billion in fresh capital through a heavily discounted rights issue launched yesterday, designed to fill a gap in funds blamed on a massive trading scandal.

France's second largest bank said it will offer new shares to existing shareholders at 47.50 euros ($68.94) — nearly a 40 percent discount to SocGen's Friday closing share price of 77.72 euros ($112.80).

SocGen said it needed to "strengthen the company's equity" after alleging one of its traders made massive unauthorised bets on European futures markets.

"It's crucial," said Axel Pierron, an analyst with research house Celent in Paris. The discount shows "the bank wants the capital increase to succeed."

Societe Generale says it cost nearly 5 billion euros (more than $7 billion) to unwind the unauthorised positions. A report by the French Finance Ministry faulted internal controls at the bank.

Existing shareholders will have preferential subscription rights and be able to buy one new SocGen share for each four shares held.

They can also trade their preferential rights during the subscription period for a starting price of 5.90 euros ($8.58). New shareholders must purchase four rights to buy one new share, bringing the theoretical cost of SocGen shares after the capital increase to 71 euros ($103.25).

"The idea is that existing shareholders follow us," chief financial officer Frederic Oudea said in a conference call. "We want this to be the biggest success possible." Shares yesterday fell 4.6 percent to 74.14 euros ($107.81) giving the bank a market value of 34.6 billion euros ($50.32 billion). In the past 12 months the bank has lost nearly half of its value.

The capital increase will allow the group's tier one ratio, a measure of financial strength, to be restored to eight percent, the bank said.

Societe Generale also announced write-downs of 2.6 billion euros ($3.77 billion) related to the US mortgage crisis, greater than the 2.05 billion euros ($2.98 billion) announced in January. The bank said the January figure relates only to the fourth quarter and did not include residential mortgage-backed securities.

Societe Generale reported that net profit for 2007 was 947 million euros ($1.37 billion), more than the 600 to 800 million euros ($871 million to $1.16 billion) announced in January.

Subscription for the rights issue will run from February 21 to February 29 and is being managed by JPMorgan Chase, Morgan Stanley and Societe Generale's own corporate and investment banking division, the bank said.

Jerome Kerviel, a 31-year-old futures trader, was sent to La Sante jail outside Paris on Friday as the investigation into the bank scandal broadens.

The bank said it intends to "draw lessons from recent events and strengthen our control procedures and anti-fraud measures" in the first half of the year.

"Very clearly, certain mechanisms of internal controls of Societe Generale did not function, and those that functioned were not always followed by appropriate modifications," French Finance Minister Christine Lagarde said last week.

Jean-Pierre Mustier, head of the company's corporate and investment banking arm, said a number of new security measures have already been put into place, including the use of biometric technology rather than passwords. Kerviel is alleged to have used passwords belonging to other employees to make unauthorised trades.