Jim Wallace said he would focus on the redundancies

In an emergency statement to MSPs, Mr Wallace said he was disappointed and his immediate concern was to help those who will be made redundant.

The minister also pledged to build on the overall success of the sector.

Most of the cuts are expected to be made in Edinburgh and staff there said news of the losses came as a shock.

Edinburgh City Council leader Donald Anderson said the losses were awful news for the workforce and for the local economy.

Scottish Enterprise called the decision "deeply disappointing".

The life assurance company announced the cuts as part of a restructuring of its organisation.

The loss of so many jobs is terrible news for the workforce and their families Donald Anderson Edinburgh council leader

It announced that it would also consider dropping its mutual status and floating on the Stock Exchange - a move which would mean windfall payments for millions of members.

The firm, which is the biggest of its type in Europe, employs 14,000 people worldwide and has more than 2.5 million members.

Responding for the city council, Mr Anderson said: "The loss of so many jobs is terrible news for the workforce and their families.

"The financial services are an integral part of the city economy and this is a savage blow.

"The council has requested a meeting with Standard Life management to discuss the decision."

Staff 'dismayed'

Scottish Enterprise said a wide range of advice and assistance would be made available to affected staff.

Few staff would speak to reporters as they left its main offices in Edinburgh on their lunch breaks but some said the number of redundancies had been greeted with dismay.

John Moore, the head of Scottish Enterprise's financial services team, called the announcement "deeply disappointing".

He said that it reflected the difficult climate Standard Life operates within.

I hope this will not lead to Standard Life being taken over - that would be a terrible loss to the region Mark Ballard MSP Scottish Green Party

A spokesperson for First Minister Jack McConnell said he regretted the job losses and stressed the company's important contribution to Scotland's economy.

Mr Wallace told BBC Radio Scotland that despite the huge blow, it was not the end for the financial services sector in Scotland.

He said: "We certainly are not complacent about the sector's future and have already established a financial services strategy group which brings together the senior players in the sector.

"This group is working to define a strategic vision for the sector with a view to identifying what specific actions the executive can take to strengthen and reinforce its future success."

'Labour's mismanagement'

The Tories blamed the policies of Chancellor Gordon Brown for the situation.

Conservative enterprise spokesman Murdo Fraser MSP said: "The financial sector was the jewel in the crown of the Scottish economy, but even this is now under threat from Labour's mismanagement."

And Green MSP Mark Ballard expressed his disappointment at the announcement.

He said "Mutual companies are a great asset to the Scottish economy, and I hope Standard Life can be persuaded to reconsider.

"I do not believe that demutualisation will solve the company's problems and I hope it will not lead to Standard Life being taken over - that would be a terrible loss to the region."