French investigators might now be looking into how rogue trader Jerome Kerviel ran up billions of dollars in losses at Société Générale but there are broader questions to answer at Société Générale and European banks in general. Like how many people actually knew what was going on. Was Kerviel acting on his own? How many looked away?

Peter Cardillo, an analyst at Avalon Partners in New York has told the Telegraph that Kerviel would have to be "an Einstein" to have done this on his own.



Jean-Pierre Mustier, the head of Société Générale's investment-banking arm has told The Wall Street Journal that supervisors failed to stop him and that there was a lack of oversight. There are also questions why the bank kept the French Government in the dark on the fraud for four days and French President Nicolas Sarkozy wants heads to roll. He has demanded that the international finance system cleans up its act so that there is no repetition, according to Reuters

The other question is whether Société Générale is using the scandal to cover up losses caused by the subprime mortgage crisis which explains why the shares of European banks dropped on Friday following the revelations.

The problem with these sorts of scandals is the broader impact on financial markets. Put simply, if people don't trust the market, they won't invest in it. If people think that bad things will happen to their money, they will instead invest in property or oil or art.