The Société Générale case, involving a rogue trader who allegedly ran up losses of almost five billion euros, underscores the inadequacy of internal controls within banks, suggesting that central bank regulators should perhaps play a more active role in controlling the trading books of large banking institutions. However, INSEAD Professor of Banking and Finance Jean Dermine argues that relying on central banks alone is not the best solution and “pressure should be exercised on financial institutions to do a better job themselves.” Read more..

The US Federal Reserve unexpectedly cut interest rates twice in January, despite little economic data signaling recession. Ilian Mihov, INSEAD Professor of Economics, says the Fed's moves were necessary to bring stability to the markets. "When the financial sector goes down, it starts spiralling in such a way that it's very difficult to restore confidence and bring back the economy on track." Read more..

Modern financial groups such as Citigroup are particularly vulnerable to issues of reputational risk, says INSEAD visiting professor Ingo Walter, who’s also a professor at New York University’s Stern School of Business.

The bigger the range of services that financial companies provide, the bigger the economies of scope. There are undoubtedly synergies and probably bigger profits. But there is also a greater risk of conflicts of interest, more temptation for aggressive managers to break the rules—and greater damage to a firm’s reputation if there’s a scandal.

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