As things start up again after the summer break, what’s your view of the EU’s new roadmap?
Well, it’s clear to me that now is the time for Europe and for the eurozone in particular. Growth has returned, at a higher rate than anticipated. Once the major elections are over, we’ll need to get to work on a constructive, consistent approach. What we must do is nurture growth in France and the wider Europe and ensure jobs are created. And it goes without saying that it is vital to support this recovery with the appropriate financing. This is the central mission of BNP Paribas. To go back for a moment to the 2008 crisis, Europe reacted courageously at the time, undertaking a far-reaching restructuring where it was essential. Now, after the ten years of banking sector reform, the major part of the work has been completed. In particular, the Banking Union represents a great step forward.
Not everyone has been on exactly the same restructuring path. Is the Banking Union emerging stronger than before?
Yes, it is stronger. In various different contexts, depending on the country – in Spain, Italy and Belgium for instance – the difficulties have been sorted out or are currently being dealt with. In every case there’s a ‘legacy’, a past history that has to be addressed, and that’s not always easy for governments. My view is that appropriate, pragmatic solutions have been set in motion. In any case, the banking supervisor for the whole of the eurozone, the Single Supervisory Mechanism (SSM) is now doing a very important job and we’re seeing the effects of that. The SSM is putting in place a set of harmonised rules governing the way banks work. This is creating a level playing field in Europe and stimulating the trust and confidence which are necessary if we’re to ensure proper circulation of liquidity in Europe.
So how should Europe approach this new phase?
At this time, it’s more vital than ever to finance the economy in a proper manner. It’s imperative that the review of the Basel III rules, whose conclusions are now awaited, should ensure that those rules are relevant to the way in which the European economy is financed, because financial intermediation is more deeply rooted here than in the United States. Any ‘floor’ that is set must not lead to requirements for an excessively high capital ratio in relation to the real risks. Moreover, the US administration has been examining the regulatory mechanisms drawn up by the Basel Committee, such as the FRTB and NFSR. Europe ought to do the same so as to avoid creating any regulatory excesses in key areas for international competition, either for the banks or for the companies which rely on their services.
This is a strategic issue for the EU, which must be able to provide European companies with a genuine choice of provider. This is not of course about weakening the financial system, but about ensuring that the terms under which we all compete are fair.
we’ll need to get to work on a constructive, consistent approach
Don’t you think that Brexit is likely to lead the authorities to take action that will harm the interests of the financial players?
Brexit as such will have no impact on the Banking Union, which is based on a set of rules applying to the eurozone banks. As regards the organisation of banking activities in London, we’re awaiting decisions from the public authorities that will come out of the negotiations now underway. Whatever happens, BNP Paribas will continue to provide the services which our clients require. Meanwhile, it’s important to make progress towards the creation of a real Capital Markets Union now that we have a single common currency and common regulatory authorities.
So what’s the right way to ensure the creation of this Capital Markets Union?
Well, work is underway and some measures have already been taken, such as on securitisation. But we do need to go further. It’s a complex issue. For instance, there are currently different legal regimes in place. So it would be a good idea to set up a ‘committee of wise men’ – along the lines of the Delors Committee or the Lamfalussy Committee that guided the establishment of the single currency – tasked to steer a transparent and efficient process designed to achieve gradual convergence of the rules governing the various different capital markets in Europe. In addition, it’s vital to do more to channel long-term savings into business. For instance, the rules governing the investment of funds collected by life insurance companies have a significant impact. These rules could be revised so as to encourage investment in companies.
You just compared Europe – or the eurozone – with the United States. Isn’t it important to take account of Asia, especially China?
That is of course an important issue. Today Asian banks are playing a greater role – in financing international trade and infrastructure projects, for example. As regards China, we’re now seeing a rise in the level of indebtedness in their economy. This is due in large part to the efforts China is making to restructure, to pivot away from such industries as steel and cement towards more sophisticated manufacturing sectors. This twin drive to restructure and modernise is rendered even more vital by the need to achieve a significant growth rate in order to provide employment and raise the standard of living in the country. It seems to me that the Chinese authorities are extremely determined to avoid any slip-ups.