After the bare minimum agreement on the banking union achieved at the recently held European Council, the debate about the future of Europe continues unabated. With this agreement still fresh, the Bank of Finland invited scholars, representatives of the financial sector and regulators talk about the future of the Old Continent. The experts gathered in Helsinki called for advancing towards a greater banking and capital markets union. The next date in the calendar: The European Council meeting in December.
Countries need to increase their level of cooperation and coordination to promote European policies capable of delivering on this goal, said José Manuel González-Páramo, Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs at BBVA, in this forum. And in doing so, he explained, it is essential for member states to commit to the required structural reforms.
Besides advancing towards a stronger banking union, BBVA’s executive member of the board advocated for a new regulatory and supervisory push in Europe’s banking sector. “We must not lull ourselves into complacency, thinking that we are more resilient today than we were ten years ago,” he warned. He also made reference to the importance of strengthening the capital markets union to, among other things, diversify the sources of funding.
"We must not lull ourselves into complacency, thinking that we are more resilient today than we were ten years ago"
Digital transformation, the next regulatory frontier
Regarding the regulatory response to the crisis, José Manuel González-Páramo said that after the regulatory tsunami in the aftermath of the crisis, it is time for regulators and supervisors to start addressing the digital transformation of the financial sector. Regarding this new competitive space is a “real challenge,” he said.
In his opinion, in the coming years banks will have to become suppliers of universal services, offering personalized digital solutions based on customer knowledge that will allow them to compete against new entrants.
“Banks need to focus on the customer,” he said. And to do so, they need to start covering a broader spectrum of services and activities, such as offering consumers data about their "financial health,” providing them with expert advice in home buying processes, helping them make sounder investment decisions through tech-enhanced services such as robo-advisors. And this is the recipe that will allow banks not only to retain their existing customer base, but to expand it and shield their most profitable lines of business against new competitors.
From left to right: Antii Suvanto, a financial expert and visiting scholar at University of Helsinky; Axel Weber, Chairman of UBS; Sirkka Hämäläinen-Lindfors, member of the ECB’s Governing Board between 1998 and 2003; Peter Praet, member of the ECB’s Governing Board since 2011 and José Manuel González-Páramo, Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs at BBVA
The underlying topic throughout event held at the Finnish capital was Erkki Liikanen’s imminent retirement. Liikanen is currently governor of the Bank of Finland and member of the Governing Board of the ECB, and was pivotal in drawing up the so-called Liikanen report of 2012, which laid the blueprint for the EU’s financial sector reform. Joining José Manuel González-Páramo, other experts shared their insights into the past, present and future of European institutions. Such was the case of Peter Praet, member of the ECB’s Governing Board since 2011; Sirkka Hämäläinen-Lindfors, member of the same Board between 1998 and 2003; Axel Weber, Chairman of UBS and Antti Suvanto, a financial expert and visiting scholar at University of Helsinky.
Both José Manuel González-Páramo and the other speakers noted the key role that the European Central Bank played in rebooting the European club and its financial system after the 2008 crisis. Regarding the EU’s Single Resolution Mechanism, they underscored its capacity to restore trust in the European financial sector and turn it into a more cohesive, integrated whole. According to the participants, an essential factor to underpin the mechanism’s credibility is ensuring that the resolution of institutions is consistent regardless of their country of origin.