To a lot of people Jérôme Kerviel is a hero. Sure, he lost his employer £3.7 billion, but by definition the people he traded with therefore made £3.7 billion. With a few reckless bets, the junior banker has created the equivalent of 3,700 millionaires among the hedge fund managers and traders of the City and other financial centres.

In derivatives trading winners exactly match the losers. Mr Kerviel has merely redistributed wealth from Société Générale shareholders and his former colleagues, whose bonuses will shrink this year, to the happy counter-parties he traded with. To that extent, ordinary bank customers may shrug and say: “So what?” But the fraud has much bigger implications, partly because of the impact that it had on financial markets and policymakers, but mainly because of the stark warning it gives of a much bigger calamity narrowly averted — one capable of hurting every worker, saver and taxpayer in the West.

SocGen’s secret unwinding of the rogue bets almost certainly exacerbated the extraordinary turbulence suffered in European equity markets on Monday and Tuesday. The closing-out of such vast positions pushed share prices lower. Just as a punter will move the odds by placing a sackful of cash on a rank outsider on a quiet afternoon at Uttoxeter, so SocGen’s rushed attempts to extricate itself worsened an already nauseous day for shares. That may have been a factor in the US Federal Reserve’s surprise decision to slash American interest rates on Tuesday. Washington’s policymakers may have unwittingly pressed the button on the most drastic loosening of monetary policy in a quarter of a century because of the deluded actions 3,000 miles away of an erstwhile bank clerk with Walter Mitty tendencies.

That is bad enough. But there is a much bigger danger exposed. If Mr Kerviel could rack up and conceal losses of £3.7 billion, he could have racked up and concealed losses of £370 billion. He had the motive: he thought that he had invented a foolproof investing system. He had the means: he knew how to dodge the bank’s rules and disable the alarm bells. Only a silly mistake caught him out when it did. He might have doubled up and doubled up again before being caught. At that point, SocGen, one of the world’s biggest banks, would have been bust. That would have created panic in world financial markets because, unlike a peripheral regional bank such as Northern Rock, SocGen plays with the adults. At any time it has trades outstanding with other global banks with a face value of trillions of dollars. It claims to be the biggest equity derivatives house in the world. The failure of such an institution would lead to paralysis in markets, with everyone terrified of doing business with everyone else for fear that they too had been contaminated. That would without doubt lead to a world recession, a world depression probably.

Except, of course, that it would not be allowed to happen. Bank regulators call the biggest beasts in the banking world TBTFs, too big to fail or, more accurately, too big to be allowed to fail. SocGen, the second-biggest bank in France is in that category.

Big-bank busts are unthinkable. Governments would undoubtedly be obliged to bail out any major bank in trouble. The squillions of dollars of bets placed every day in the wholesale money markets by such banks are underwritten by taxpayers.

Times Recommends

• BA chief waives bonus after T5 fiasco
• Prospects of cheaper loans hit as Libor soars
• Rice price dives as US and Japan set to unlock grain pact