Ethics and governance in the European Financial centers

I would like to say a couple of words about the situation of the Société Générale.

If the issue takes place in France, one the one hand there are subsidiaries of the Société Générale in other financial centers and on the other hand what hapened is definitely an ethical alert for every financial center.

I do think that both the trader and the bank (the brand) are victims of a lax system that is supported (some would say promoted) at the European level where the rule of business is unfortunately more important than ethics : money over ethics.

What does the issue mean ?

1) This is evidence that internal control and internal audit are not working properly despite procedures that are mandatory but not necessary enforced as they should be.

2) This is evidence that external audit are not working properly despite procedures that are mandatory but not necessary enforced as they should be.

3) This is evidence that supervisory authorities are not doing the relevant supervision.

All that is true as well for AML.

Red flags are knowingly ignored provided that the business is growing.

Despite warnings from Eurex about the trader's risky behaviour, nobody was willing to tighten up the ship : everyone was satisfied with the trader's explanation without verifying : the trader was making money so was making the bank.

Serious reputational risk due to poor ethics actually depends on the size of the jurisdiction : the smaller it is the higher the risk of collapse of the cente : this is definitely an alert for small centers in the framework of this blog.