 Let's take a deeper dive into the outlook for crisis management and the resolution framework with our next panel today which is moderated by Laura Noonan financial regulation editor of the Financial Times and Laura will introduce her panel over to you Laura. Thank you very much Susan I'm glad to be the third artist person that you guys have out of the three speakers so far and I've got a fourth artist person to my writer Sean Berrigan who is most of you know is what's your full title I know it's got a lot of words so maybe you'd like to share your full title. Director General for financial services sorry financial stability financial services and capital markets union excellent that's Sean. Fizma will do okay well I did have a ban on all on all acronyms for this panel so take with this one all right and then next to Sean we have Elka Konig who is do we call you director or chair of chair person or chair chair of the single resolution whatever you want it. If ever you like it then we have Peter Simone and you're currently representing the association of what's the of bank I'm the managing director of the world's oldest global banking network the world savings and retail banking institute 98 years old and the European arm the European savings and retail banking group. Thank you so much and then next to Peter we have Irana sorry Irana Tingali who is chair of the European of the EU's committee on economic and monetary affairs from the European parliament so I'm very delighted to have all of you guys here as everyone in the room and in the audience knows this isn't quite the conference that I think some of you expected to be a week ago when it was meant to be something quite celebratory and now I guess it's more a point for reflection as to where we are where we go from here and Sean I'll start with you I mean you've been here from the very very very start of this we're now more than 10 years into the banking union project and we had a very good overview from the commissioner earlier about the things that have been achieved but did you expect to be further along by now by 2022 did you think we'd be done? It's a difficult question to answer I think possibly at the beginning yes but as time has gone on I have become a little bit more let's say realistic about the pace of progress I mean I think there are two ways you can measure progress in a project like banking union and this sounds a little bit kind of trite but you can measure progress by how far you've come from the start or you can measure progress by how long you still have to go to get to the end now I think if we are you know if we're fair we've come a lot longer along the way so we are more than a halfway I think the very fact we're sitting here in this conference with Andrea and the SSM having organized at Elka here for the SRB shows that we have made a lot of progress we have a single rule book which we continually seek to improve but it's largely there and I'll come back to the improvement in a minute but when I used to 10 years ago you know bore everybody about the benefits of banking union back then and I can bore you again about them now if you want we always had these three pillars you remember and the three pillars holding up the banking union and two of them at the SSM and the SRM and the third pillar was Edis so I think the story is that you know I don't think I'm not disappointed that we're not further along of course I would always like to be further along but I'm realistic but I do think unless we get the third pillar in place the banking union although it works well will not work optimally and that's why it's important that you know we continue to push to have the third pillar in place and is there any argument that the third pillar is just no offense but like never going to happen and we should just make the best of the two pillars you have and make those as optimized so we can get them because the third pillar that some of the differences are so entrenched that you could just be throwing good money after bad spending more time on us I can see Elka shaking your heads over you in next no I don't think so I mean I think you know you you never want something that functions so suboptimally so this is working well but it could work better and I don't think it's true in fact that we can never get to the point where deposit guarantee schemes at European level become sensible and become acceptable we're not there yet but I feel that you know we continue to make the arguments we will we will get there and I think even what we're going to do now in terms of crisis management I can give you a sneak preview is going to very quickly reveal how even the improvements we will make in crisis management will not be the full amount because the system could be even more robust if we had a third pillar so the arguments for the third pillar aren't going to go away I mean their obstacles need to be removed and they're difficult to remove but the arguments why you need a third pillar will remain okay I'm going to bring you on this point is over first of all a quick show of hands from the audience have any of you think we will get a European deposit insurance scheme raise your hands okay we have Franny Moon who is not able to see the audience we have a very healthy I'd say 80% although I'm not a math it's a good majority the good majority of the room things they'll get I should also say sorry those of you who are online there is um an online forum where you can ask questions I think someone was going to give me an ipad so I can see those questions so yeah I'll get them from the ipad anyone in the room just if at any point you want to ask a question just stand raise your hand and we'll get a mic to you Elke your defense of the need for the third pillar I think we need a third pillar if for the simple reason of the word that Andrea hates that I hate home host because so far we have a system where you have a European supervision you have a European resolution scheme but when it comes to deposit insurance you are back to nationalizing I could actually make a very simple argument and I sometimes believe economics count we have in Europe now or we are building up the single resolution fund one percent of cover deposits we are building up or we have built up the DGS is 0.8 percent of thing of deposits quite a healthy number 1.8 percent in total this is nicely comparing to the US it's 2% of cover of deposits in the US but our system has one european pot and 21 plus national pots so and this is an argument where you could say it would be by far more efficient and it would also protect the member states far better if it were european system the european pot is fully harmonized fully now mutualized the rest is fragmented this is one argument and I would but I would also agree with Sean I think we had been and I would have hoped for more progress like always but we have been fairly close to moving the first step into it is it was just one step too much though that's why when we now work on when you now work on CMDI you will get back to the same topics on harmonizing as a pre-step for then hopefully mutualizing it I'm optimist by nature otherwise I would never have taken up this job so do you think we'll see a deposit insurance guarantee scheme or the um it is within the within your term think we'll see term ends in less than six months by now no you won't see it is during these six months I'm not even sure that we will see it during Andreas during the term of my successor but we will see it at some point during our lifetime version of FDIC well I hope to live long so I hope to see it thank you very much Elke Peter I'm going to bring you in here how important is it is to your member likes we are so diverse as the European discussion is we have members who are fully in favor of a fully fledged system and we have members who are completely against it and the discussions that we have here show that within Europe there is not this bright consensus about this topic as here in the panel and under in the room here the problem um from my point of view is that it is started had a very very bad start I will never forget the day when the five presidents paper came up I read this passage and you asked did you write this passage I I read this passage and I I want I wondered how something like this could happen because here was suddenly on the table a final solution presented as the only possible and acceptable and being in politics for many years as the five presidents too I asked myself do you really start a political discussion like this I think what we can all agree on is that we have to have the highest trust of dispositors that we can reach looking what is necessary for this I just want you all to remember that the mansion zero point eight for the DGS one point eight together with the PRD is less much less than the commission in her first proposal for the DGS has proposed only for the DGS just to remember two point five that was the starting point when the commission told us all to reach trust within our countries in the population of Europe at the markets we need to have not less than two point five zero point eight we ended up zero point five in France because of a concentrated banking market so but we have more trust than before even if it's just one third only for it is so what this showed is to us often it's not about only pure figures and only about pure systems it's only about do the people trust in something or not and we all know that if it comes to the hardest hardest case no deposit guarantee system in this world will hold not the US system not ours but as long as people trust that everything is done that they are in person protected nothing happens you get no bank runs people keep calm so we should if we really want to bring a process forward that takes into account our all key interest to protect the deficit the depositor best is that we should go all back to zero and think what is necessary to gain trust and what do we are urgently have to avoid to lose trust in systems where we have a lot of trust in our membership we have members who think it is very important for many reasons for the home host problematic for the trust in their countries that we come to a fully fledged systems but we have also member who say in my country in IPS systems for example are more deposits than in the first 20 european states deposit accumulated if you damage trust in our system just a little bit like these what do you win for the stability of the overall system so both arguments have a legitimate backgrounds these are both legitimate positions if we want to go ahead in europe we should get out of this front lines where we are in now since years because then we will never end up good when i say we should restart last half of the sentence i really mean we should go back to something that the former chancellor bismarck said in the 19th century already he said if you want to understand foreign policy and it's exactly the same situation here you have to put yourself in the shoes of the one who is standing in front of us and look at yourself and try to understand you then you understand him and then you get together forward i think acting like this is the only possibility to get ahead so there's lots there to pick up on and i can see elka and shown are nodding at various points that they want to come in on first of all i want to bring in you arena um from your perspective how difficult or how easy is it going to be do you think to get agreement on what it is will look like well we we we've seen how it's not easy you know definitely so i think we all wish to be here celebrating something and actually possibly not all of us well maybe but i think most of the people that are have been working in the european institutions trying to you know achieve this the advancement of the bank in union are a little bit disappointed i was disappointed when i when i read the the conclusion of the euro group although i appreciated the effort that pascal donohoe put into this and i really appreciated that what what he did but uh i was of course disappointed by the by the outcome or basically they uh uh they agreed that they disagree on on these and they only agree on the fact they will just kick the can along the road the endless road of the of the banking union so um i don't know i've been wondering myself how we could change the framework and how we can achieve the result because most of the people still you know i agree on the fact that we need to advance on the banking union but apparently there is something about the journey that we've designed or maybe the way it's been framed or proposed or the way we've negotiated and actually if we look at it it has been changing along the line i mean uh for example at the very beginning we always talk about the three pillars but at the very beginning there was supposed to be a fourth pillar of the banking union with the bank structural reform that is another piece that fell along the road during the last eight years and that was supposed to be a reform of the banking system that aimed at uh you know at the time there was the issue of the to big to fail and this was seen as an important move to reduce the risk and then this was abandoned eventually of course parliament has its own responsibility in that i i was not in the parliament at the time but i know that parliament has a big responsibility on that but my colleagues who were there at the time they told me they didn't get any big signs of sorrow on the side of the commission which withdraw the proposal right after i might be wrong uh so i'm happy to engage uh so uh so we started to think in terms of you know how can we achieve the banking union and still reducing the risk who we started to look at npls for example so we had the action the roadmap or on the npls the the calendar provisioning we so we started to move a little bit the target and then we started to discuss about the the sovereign risk so we started to move a little bit the target and then the funny thing is that what they you know we also changed the the narrative at the beginning for example the banking union the possibility of having really cross-border big groups and exchanges was the mean to break for example the sovereign bank link you know that and then it became the opposite we the sovereign became the mean through which achieving the banking union so we completely changed the the approach and and i think we have to think about that because probably the way that we framed things that made the road narrower and more rigid rather than trying to open up so we started to eliminate instrument to change the narrative to change the the final objective with the means through which achieving the objective so i think this also ended up narrowing down the room for maneuver and for negotiations so maybe now it's time to restart and trying to reopen the the field and open up a little bit the possibilities and maybe be more creative about how we want to to set up the the the roadmap to achieve what i think everybody agrees it's something that we badly need so are you talking about a more in terms of like the design of what it is might look like a more i'm like flexible approach to what it might look like maybe a little bit different in different countries or i'm thinking about the whole thing of of banking union because i agree on the fact that it's it's not that easy to tackle these things separately and and and trying to say okay first we do this and then we do that and then we can do this type wise approach it proved to be very very difficult especially when what was supposed to be the final outcome becomes a prerequisite step to get to the next step so so we are mixing up a little bit objectives with instruments and and and people may feel that you know of course as usually happens in negotiations someone is more interested in step one but not in step two and vice versa someone is not interested in step one but is interested in step two but he says okay who grants me that i if i agree on the step one then the step two will arrive because you know you know what sometimes what happens is that i make a sacrifice on what it's my you know ideas and i agree on step one thinking that we will get to step two and then step two never arrives so i i think that we need to be a little bit more holistic in the approach of the banking union and trying to find a way to keep things together and find a new way of negotiating but i don't have the right answer otherwise you know i i would be in a different position maybe if i had all the answers to how to handle that but but my sense is that it's really trying to be a little bit more creative in how we approach it so john from your perspective at this stage in the game 10 years on how easy is it to reimagine some parts of banking union in a more holistic way and to do what irina's talking about quite i mean if i'm honest because i mean i agree with irina fully but in a way the process we've just come out of is exactly that process where we tried to identify all the remaining steps in the banking union tried to approach it in a holistic way but it hasn't worked that that was the work plan essentially was to lay out all the various elements we wanted to put in place and then move in parallel that hasn't really worked out it was a heroic effort by the president of euro group but it simply wasn't possible to overcome the the many obstacles so i i think in fact now where we step is we are going to make a step forward in one of those pillars which is crisis management but what we will discover is that everything in banking union is a bit connected to everything else so when you make this step forward you're going to find that you know elements are not there that you would like to have there and i think edis is one of those elements we will find that would be very useful to have if you're trying to build a fully consistent crisis management framework but i wanted to come back to some of the uh some of the comments on on edis and the passages in the five presidents report which i can't remember it's 10 years ago maybe i did right then maybe i didn't i can't remember but you know what we put on the table as a proposal in 2015 was in fact something which was all that came later it was in it was a complete move from liquidity to full risk sharing it was however a consistent step you just went from a to z there were no breaks in the middle what happened in the discussion of course that people said they quite liked the step from a to m but didn't want to go any further and others wanted to go a bit further so that all became another discussion about liquidity versus risk sharing etc but the first proposal we put on the table was internally consistent and had all three moving from as you remember liquidity to co-insurance ultimately full risk sharing so there's another effort which didn't work but i think when we put it on the table the idea was not to undermine confidence in national deposit schemes it was quite the contrary it was to reinforce confidence in national deposit schemes because i mean i am one of those people who believes that if you have a single jurisdiction like banking union then one of the characteristics of a single jurisdiction is single or uniform protection for depositors so every depositor should feel as protected as every other depositor irrespective of whether they're in one part of the union or another part of the union and that's what edis was about was about leveling off and making sure that everybody ultimately has the same level of protection i think the problem arose was of course that there was a sense that the risks within the union were not randomly distributed let's say and that some parts of the system bore more risk of accessing edis than others and there was a sense that some parts of the union would be subsidizing other parts of the union if they joined in a in a kind of mutualized framework so we had the risk reduction risk sharing debate i.e. we needed to reduce all the risks in those parts of the union where which were perceived as being more riskier so that we could then share risks that actually was delivered i mean the risks have been reduced they were identified in two respects palatable liabilities available in banks and non-performing loans and on both of these metrics the risks have been pretty much removed so that risk reduction risk sharing story is over i suppose that was why i suppose some of us were a bit optimistic about the edis discussion because the risk reduction the risk sharing debate had ended but it wasn't to be i mean there are still other issues around that but as i said i still believe as we go forward and work on crisis management this one step we're going to find that issues in the other pillars will re-emerge so edis will be missed from the framework home host issues will most likely re-emerge in this context as well so we will um we i was never fully convinced of the kind of holistic approach in the sense of moving together at the same pace on all elements it's very difficult to do that kind of general equilibrium stuff but i do believe that you even when you move sequentially you will reach points where you have to stop and let the other parts catch up so um i think you know what has come out of the euro group is still a very good result we will crisis management is a very noble area to be working in if i may be honest it's a very important area to work in as we know well as we know well but we will we will discover the other parts of banking union we needed thank you so i certainly do want to spend a fair chunk of this on crisis management but we do have quite a few questions around edis um elka one for you from the audience who says is there not scope to use the billions and billions stored in the s or f to become part of the europe wide dgs what do you do with the s or f as it sits idle waiting for a crisis well i'm not sure whether i'm so unhappy that it's it's idle waving for the moment because it means that we didn't have a crisis where we had to even tip in this and like the commissioner said in the beginning i think we've proven that we can resolve banks but i'm not sure that our target should be can we resolve five per year it should always be the exception and not the rule to resolve banks but i'm pretty clear no for the time being it's very safely and i'm looking at our vice chair who is responsible for managing the fund it's not a pleasure to be an investor for very safe investments in this environment we have made the point currently or recently to say if you really want to take a first step into a liquidity facility edis which was the first step of edis why not engage the fund in this the fund could be the one to lend to this system well then if nothing is happening the money might still sit idle but it then sits idle in a edis compartment and to make it as a first step in the system i still think it's worth thinking it would use would need a lot of legal changes probably because i just also wondering i mean could the fund be the one to help narrow the yields on certain european countries government debt i see that as a real challenge and probably i could easily say this is not within the mandate of the srf and this is not in the mandate of of the srb and in the mandate of the fund no but i would still believe that moving from where we are with this scattered funds to moving to quality european fdic model and to be fair we have moved a long way even five years ago i would only have talked about european fdic if i were closer to the door than all the others because i would have immediately been killed nowadays i think half our constituency is probably saying yes this is where we want to end in some form or shape for this the money within the single resolution fund could be one of the starting points to get the edis come get the dgs component to get an edis component working it's a long way and let's not be naive we are regulated by a law or a regulation but we also have an intergovernmental agreement and the like so to get all this up and running will need political will will need more steps to take but let me perhaps even as i have the chance built on what shan said i think this idea and if it was an incredible effort and you will put in by pascale donahoe to come up with all the bits and pieces will prove helpful because it shows that this all needs to be addressed and the communication didn't say it will never ever come it just says we start with one step and the next to come and i'm firmly believing this is the only way you go forward because if you say i need to address everything at the same time and a bit in tandem for me normally translates at the end in it will be difficult and it might take long okay thank you very much um i'm going to come one question has a more general point which actually touched on something shan we talked about earlier which is europe seems to make the biggest progress during and right after crisis will it need another crisis for edis to happen peter i go to you first on that one because you caught my eye it's not something that is especially a special rule for the financial sector i think europe if you look at many political fields often moved forward when there is a crisis but it will be a crying shame if it only can move if there is a crisis well i think especially in times where that are not so tough we should all try to our very best to understand each other because that's what it's all about in europe that one understands the others and its needs and its his legitimate interests and from this starting point trying to find solutions that are more pragmatical and less um let's say ideological as some of the positions had been here in the past represented from all sides um i hope we move forward even if there's no further crisis in the next time shan was it easy or to get things done in the good old days after the crisis well there weren't very good old days to start with um i mean i have to say it is true that we tend to make the bigger steps after crisis because as the commissioner said there's a sort of there's something that has to be done and then we get around the table and do it personally and i speak personally i've never founded a very efficient way to make progress because you have to receive quite a bit of damage before you make progress far better to make the progress before you so you know it's a little bit like closing the door after the horse has bolted so and the banking union is a good example i mean the we want the banking union because we want to restore the level of banking integration we had before the crisis so now we have the architecture we need the architecture we could have done with by the way to manage the integrated banking system before the crisis we might not have had the crisis frankly if we'd had the banking union architecture before the crisis but then we had the crisis and then we get the architecture and now we have to sort of use that to restore the damage that has been done so of course from an institutional point of view from a bureaucratic point of view it's very good to say that we need a crisis and then we jump forward but i think from an economist point of view not the most efficient way to make progress for an institutional basis and we should be able to in periods of calm work it out and move forward i look at you think we need a good crisis to get this going i would fullheartedly embark to shawnt's argument of course you fix your roof normally in good times and when you see that we are in very uncertain uncharted water for the moment i would rather like to have the roof fully fixed than just having a bit of plastic on and hope it will be sufficient but honestly i'm not so pessimistic we have now or the commission now has to come up and i know there's a lot of work already gone into this with this crisis management deposit insurance review and don't forget there's also the banking communication review so the state aid framework and this will get us fairly soon back to some of the more integral question on harmonize on broadening the scope of banks that go into resolution if you broaden the scope of banks going into resolution then you need to know how you fund if need be and there the paper of the council is very clear it says it's emerald on the one hand so banks own fund to be built up and it is the industry funded tools and for me industry funded tools first and foremost translates into dgs's and this means you need to talk about exiting the banks you need to harmonize the use of dgs not just as a pay box which might be not the most efficient way so purchase an assumption transaction or sale of portfolios and banks and for this you need to harmonize the question on what could be the upper limit to use those funds so there is a lot of steps which basically pave the way into it is okay i know we've taken a lot of questions well a few questions from the virtual audience have we any questions from the actual audience on the deposit guarantee scheme because we are going to move on to crisis management soonish so if you have a question now on the deposit guarantee scheme this would be a good time okay the actual audience is very shy so i'll come back to you got two more from the virtual audience and while the actual audience got to gather some courage for the next time i ask you from the virtual audience our uninsured depositors of consumers are uninsured depositors i.e. consumers and SMEs at risk with the current crisis management framework if they have deposited amounts at medium-sized banks elka i guess i know we talked an easier question i would say the simple answer is no we have a deposit insurance system and but the probably also honest answer is the cover depositors are always safe if the djs is not sufficient the national budget is the one to back the djs there is a clear understanding of a number of whether you talk about dj SMEs whether you talk about non-cover depositors that you need to protect them in the interest of financial stability and now let's be realistic in most cases this should be possible will it be a walk in the park no will it in some cases overstretch the capabilities of the of the djs yes i am more fearful that it might overstretch in some cases the belief of depositors in other banks that the member state will manage and this is i think again a plea for a more european system because we have seen it in in the past well if you see some trouble here why should someone in another bank be so worried yes but they are because they believe the system might not be capable and i think there a european system is always a better basis okay thank you another one elke which is probably going to be for you again although shorn you might want to chime in without an edis is liability and control truly truly aligned within the banking union so without having a european deposit insurance scheme is liability and control truly aligned within the banking union i can think of a one word answer but uh i mean no surely not truly a lot no no no but i mean does is it is it misaligned to the point where it's a fundamental sort of problem in the system no i mean what we have done with banking union is we have we have produced a framework in which we can make decisions collectively as a union so andrea makes collective decisions to the ssm for supervisor single decisions i don't even use collective single decisions and elke will make single decisions for resolution so these are the decisions that are taken now what is often argued is of course that the implications of those decisions are sometimes left at national level and there you can envisage some misalignment and incentives between decisions that are taken centrally and some of the costs that might be borne nationally those misalignments can be managed now and they are managed now but they would be as i keep saying it's not that banking union is not working banking union works it would just work more efficiently and more effectively with the third pillar so those collective decisions can be managed and they are managed but they could be managed more easily more efficiently if we had a third pillar so this is the sort of my my commissioner's line of the glass being half full it is more than half full i think it is two thirds full but you know we prefer to have it full full okay and another question actually shown which is well it's addressed to the commission which i guess in this case is you in the case of spare bank this is an easy one actually well the first part is in the case of spare bank did the Austrian DGS have to pay out for the german branches of spare bank would the Austrian if the Austrian DGS had been too small would the germ or sorry would the Austrian DGS be too small had the german have been too small had the german operation been slightly larger which is more probably an elke question um there are both for elke i think well i think the answer is very gallant have you shown okay i think the answer is separation of responsibility yeah not sure it's unfair no to be fair the system is pretty clear that the Austrian spare bank or that germany was a branch of austrian spare bank and therefore the austrian DGS was responsible for this and from what i understood was supported in administration by the german DGS to manage it so the costs in this case are for the austrian system but also to be fair from the in this case and the austrian DGS has long been repaid out of the proceeds how how the overall case of the austrian spare bank worked and if that was a good case of like resolution working well do you think i think it was a very peculiar case for me a very good case and a very standard case of the resolution framework was the far larger case banco popular which was a bank that failed which was also a cross border active bank because it had a portuguese subsidiary and where the sale of business worked smoothly if you were today to look into spanish government bonds you would not be able to spot the time of the resolution of banco popular it was basically neither to be spotted there nor perhaps with one exception in any of the banks bonds or bank equity it was a very clear case spare bank was a bit a peculiar case because clearly the basic idea in this case was that if spare bank fails it will be for the austrian parent to basically bear the losses and to resolve now you never plan for a bank that fails due to a lack of trust coming from a war scenario and looming sanctions so what we basically were faced was with a liquidity crisis a classic bank run which made it impossible for the parent to support the subsidiaries any further so that we ended in trying to take the best decision you can take at this point and i'm always saying the resolution plan was very helpful to have a starting point to know where you were but then you needed to react to the crisis and you needed to find the best solution at this point in time and not to say i had another idea for a totally different situation and whether any were there any learnings from that case that you'd like to incorporate into policy going forward or was it just so unusual that never happened anyway so no i think that one learning of this or one simple fact is you do a resolution plan for a baseline scenario you try to prepare you try to understand the institution with your baseline resolution plan and the most likely scenario we always take is large losses make the bank non-viable we also think about liquidity runs but i think everyone in the room would have said if if the team that's responsible for the bank comes up with a scenario and what in case of a war you would have said did you have a bad night can we please stick to realistic scenarios and a plan so the plan is a baseline but the plan is not something that makes gives gives you a straight jacket so you always need to stay very agile to be able to address the problem you have at hand and not to say have a solution for another problem got us away and peter we've got a question for you from the audience and it's a question i think that you're going to like and be able to answer easily to peter is the cost of regulation affecting the bottom line for banks is the cost of regulation affecting banks profits for sure everything that costs affects profits but it's always a question what do i get for it and when banks have to pay to funds to create a stability in a financial system looking at the overall picture it helps also banks for sure the question is only how much if alka asks us for 55 billion euros in her fund this is what is politically agreed this is something that makes sense at the moment it looks like at the end of the day she will has 80 instead of 55 which is much more than the original political agreement then it starts to getting worth discussing about it alka have you gone after them for an extra 25 billion a billion and worth of going no i've not gone for after 25 billion on top just for the sake of the srb no to be fair and peter knows it very well the 55 were projection by very reputable people at the point in 2012 13 to say this might be about 1% of covered deposit at the end of the period there were always a bit as a guidance there were not a politically agreed we stop at that number the agreement then was 1% of covered deposit and have always said those that wrote the legislation gave our team a fairly interesting task you have to build up in even steps to an unknown number most people that had basic math classes know that this is a bit an unsolvable equation i think we've done very well in trying to adjust it stepwise and with depositors increasing till now now the situation might change in 2022 23 we might be closer to 80 than to the originally estimated 55 all right thank you very much um iran i've got a question for you from the audience a decade on and seven years into operations the srb only has one woman on its board will parliament accept an all-male board when the current chair being female steps down i think that the parliament has been always very vocal about it and the commission knows very well and i think it's a collective effort that we have to make and the issue is not i mean for how i see it is not simply to have a woman at the top of which of course is always a good sign a good signal to give but the the point is to have women involved in the process because the problem is that for many years when we received uh uh you know that the number of candidates for a talk to be evaluated for a top position there were no women included in the process and so this is a battle that we as a parliament always fought and we've been fighting also in recent years and i think that we've seen improvements also if you see the um appointments that uh have been made in the past couple of years the in various uh european economic authorities and institutions uh esma jopa uh well i think we achieved good good results but the we started with the process totally and i totally appreciate that that that this is a journey and you can only you and you can only appoint people from the available pool but very directly if we get to six months time elka steps down will the parliament say that there must be at least one woman on the board or will you accept an all-male board i think that we need to we need to receive a pool of names that are gender balance and then we will evaluate on the base of competence because that's what we end up with a board of all men that's okay this election is made on the base of competence as always has been the case and uh i as a woman i would never desire a woman at the top because she's a woman all the women we have appointed they were appointed because of their competence not because they were women but we want to have the possibility of evaluate women in the process and that's the demand that we ask the commission when or the other institutions when they have to send their names we want to be able to evaluate both men and women and see who's best suited for that post that's where we are inflexible i understand that but there's also an objects element to it i mean having a board which is entirely male surely isn't going to look good and there's also the element of balance where people argue that if you have a mixed gender board that's an advantage in itself so elka if you were to hand over to an all-male board would that disappoint you i think there are some questions to which i don't take a position i would hope that we keep a balanced board and that we keep the most balanced board by talent and by capabilities and i would be probably disappointed if it's then an all-male board but let's also be fair and this is more to everyone outside if women are not applying for positions it's difficult to have women so i would strongly encourage everyone for positions please apply it's worse the effort okay thank you and shan a factual question for you um which is a bit close to home for us i think what happens if a dgs backed by to a dgs backed by an EU state if the EU state itself is on the brink of bankruptcy let's hope this doesn't happen this would be a rather trouble situation i mean i i think if that the situation then the problem is much wider than the ggs okay so we're into bailouts again so we're into a much different scenario but i mean there is no expectation that we will be in that scenario so that's be clear um but there were of course risks during the last crisis this was one of the problems which was emerging when you're in in a state which is in itself the state itself is on the verge of of bankruptcy of course it cannot underwrite all the things it needs to underwrite but you must remember we're working in the whole crisis management field we're working towards a situation where that won't arise where the need for the state to step in behind the national dgs and this is i give you what i was going to say earlier when you work on crisis management if you want to be you know faithful to the underlying principles of the b or d which is that you preserve financial stability but you protect taxpayers to the highest you do not want to have a situation where if the national dgs gets exhausts its funds that the national government must step in and that's where we're going to find that having either surround would be very useful because either could play that role of providing liquidity that the state would normally provide so therefore having either in the frame will allow us to you know satisfy both principles both kind of objectives of this b or d fully preserve financial stability maximum protection for the taxpayer so i'm going to turn now to the crisis management framework i think we've got about half an hour left on the panel um beyond the ideas that you talked a lot about elka what are the other potential sticking points do you think you're in the crisis management framework what needs to be earned out well i think the first point is clearly and the commissioner mentioned it and andrea also i think mentioned it that we have obviously an agreement that we need to ensure that a bank that's failing a mid-sized bank can exit the market we are living in a market economy so we're not living in a system where the failing ones get some safeguards around and then carry on so the main part is to ensure that a failing bank can exit the market without causing financial stability concern for this you can broaden peer you can use the resolution powers and as i said then you need to think about what are the financing mechanisms behind the second part is clearly something we've seen and i hope for some movement there we are living in a world where insolvency systems are national and i've made the joke i thought the austrians should be similar to the german one i assure you we speak the same language but the systems are different so we have 21 or even more systems and i would hope that we see some narrowing down of unnecessary hurdles within the national systems there i'm not expecting that we that we harmonize insolvency systems at all i'm expecting that we harmonize the most metering parts in this area we need to address once more also the topic of a single banking market which means where are we on liquidity waivers i'm looking at andrea i think he's not happy with where we are and the like could also be a topic not sure whether it really fits into this framework and those already would be good steps forward but let's also be realistic to your previous question i think we should never forget how much better the system is already equipped risk reduction got a bit out of our view now we have achieved quite a lot have made the system by far more resilient so we are talking now when we talk about the crisis witness about a backbone to the system but not about something that has to jump into action tomorrow hopefully thank you so peter i'd like to bring you in here as well in terms of the crisis management framework what are the key sticking points for your constituents and i guess possibly there's different ones given that you span such a large range but maybe give us two or three of them so first of all we would like to see here an evolution and not a revolution we hope that elka sentence the resolution is for not for the many it's for the few not for the many is kept alive and will also in a modified framework be the leading rule and we would hope to see here more proportionality in all regulation that we have in so this means looking at the size the complexity of business models in all things from the resolution planning but this is something in general that we would ask for if we could manage this then i think we meet better the needs of all the actors on the financial markets okay thank you um i'd like to bring you in as well what do you think are the key are going to be the key sticking points around the crisis mechanisms well you mean in parliament yes parliament because we we i still can't you know tell much about uh because we haven't opened the debate yet so we have to still see the proposal so but of course this is the topic that we have been discussing over time so uh the what i can foresee as as an issue and one thing that i have to say that that is i want to to make it clear the fact that we have isolated crisis management and living the it is which is supposed to be the most controversial doesn't mean it will be easier honestly i i don't think you i i'm sorry i don't i i am myself an optimistic person but i need to be realistic as well and uh the crisis management has its own challenges and uh and one is what uh john just mentioned the fact that it's closely linked for example to it is as well because then it would be difficult to to have that kind of uh intervention without addressing the issue of the funding and without addressing the issue of a common safe net and uh so these i think it will be the biggest uh issue and the biggest challenge that may uh you know make it difficult to to to to to to get in agreement not to mention the risk i hope i'm wrong that we end up undoing some of the progress we've made to the extent to which if we go back to a more renationalized way of addressing the crisis we narrow the scope of of the srb and for me that would be something to avoid but it's it's it's a risk because if there is no uh you know exactly with no it is no possibility of having a european safe net that that's the risk that when you're going to review the crisis manager you end up renat nationalizing or are we pushing everything on the national dgs so i think this this could be another issue but uh i mean it's early i don't want to be past two pessimistic we will put all the effort in trying to make it work but it is indeed a challenge so so sean how optimistic are you about crisis management getting through fine oh i'm very optimistic um i'm even more paid to be optimistic than other people but no i am very optimistic i think i mean we're all experts around here but this all boils down to pretty much what elka said you know we want to have a framework that allows banks of all sizes and all business models to be managed in a crisis in a way that reconciles these two fundamental objectives of the brod you preserve financial stability and you protect the taxpayer that can be done but as we've seen in the cases so far it had it has created a lot of stresses in the system it doesn't need to be as stressful as it has been now it's an old story you know we used to know how to handle banks that were too big to fail governments used to bail them out and now we've moved to a system where you know creditors bail in and governments no longer bail them out so we know how to handle the big banks and we know how to handle the very small banks they go into judicial liquidation and they're taken out the same old problem arises what do you do with those banks in the middle the ones that are too big to be managed to judicial legislation or judicial proceedings but not big enough to fit into the framework as we have it now so what we want to do is to extend that framework to capture those banks in a way that allows them to exit safely from the market preserving stability and not cost in the taxpayer and that means we have to go back into the system and look at certain changes we would have to make around the use of resolution so that relates to not just we always speak about the public interest assessment but also the early intervention part has to be discussed as well because we have issues there so I put those together if we're going to extend resolution to these mid-sized banks which may not have internal funding it may not have bail in the funding available we have to think about what external funding available so there you know we have national DGSs are they able are they most efficiently able to intervene in some cases yes in some cases they're able to intervene in many ways in other countries they can only pay out the question arises is this the most efficient way to organize DGS so you must look at how you organize your DGS to optimize your funding possibilities and then to do that you're going to have to look at how DGS is treated in the insolvency framework so which brings us back so as Irina said nothing easy there but at least the issues are clear we know what the issues are they're fairly they're technical issues at one level they have a lot of politics stringing out of them as well but the issues are clear and when you think about the medium size banks to what extent are those political issues complicated by the ownership of them in certain countries I don't think no I that's that's really not the issue the the issue is really where you draw the line between the medium size and the small size that's the that's the more important issue where they're located I think is less important or who owns or who own if they're owned by the German what really is important is how how you draw that line and how you work out you know those banks and that will be a decision ultimately for probably for Elka to do we'll have to draw that line and say well this one I can take into resolution and this one I will send to national in but Elka will need to be will need to feel secure that when she sends it at national level that the national level can handle it I think that's probably one of the topics we had to learn that we need to really have a clear understanding of what the national DGS is then are capable and allowed to do because otherwise you might end a bit in this situation well the national authority should take action as a domestic liquidation will be a disaster and at the same time you don't have really an answer how to deal with a mid-sized bank so I think there's a lot of work to just clarify and then to build the necessary funds be it in house or be it as part of a framework to deal with what we I think all call under alternative measures so if you talk about purchase an assumption well if the DGS then says but then I'm off the hook because I'm only there for payout it doesn't fly we've got another audience question and Sean this one's going to go to you because it's going back into the crisis previous one and speaking about crisis management do you think precautionary recapitalization worked well in the last decade especially under its temporary aspect I maybe explain the temporary aspect for well well well the precautionary recapitalization is essentially a temporary concept it's given to you as a precaution and then it's supposed to be given back when the temporary disturbance has passed has it worked well but it has worked that's for sure I mean we have used it and it did prevent problems and we use it for we use it from one to pass okay they haven't paid it back I was going to say I recall that success but you know as I always had this discussion with with Elka we never define what temporary is so I mean temporary comes to an end when it's right to come to an end but I think it's another area where I think if we get the crisis management framework right we get the early intervention part right we get all of the other parts right precautionary capitalization itself also worked better because it was one of the instruments we were having to use in these stressful situations where as I said the crisis framework wasn't optimized and it's still not optimized but I think if we can get it into a better shape all those things around precautionary capitalization will become much easier to use and will be used I think for let's say more standard purposes Elka are you a fan of precautionary recaps I would say within this entire framework as I mentioned earlier we need to look into the crisis management framework we also need to look into the banking communication which is dg comms her own rules around stay date to align them here we have still work to do and I would stay consistent to say and we need to have aligned incentives so far neither the bailing rules are the same nor do we have a fully aligned log logic there so this needs to come I would leave an instrument like precautionary recapitalization in but with a clear understanding what temporary means temporary is not eternal but is it three years is it five years so you would effectively have a maximum cap on us yes I would I would think we I'm not even sure whether I would put a maximum cap on it in writing but I would have a clear understanding what temporary means it was designed like top yeah for bang to restore confidence not to be used but to basically then thereafter we being withdrawn and I think there is still room to go but I agree also is shown it has to be part of the overall framework okay onto a more general topic and this is going to come to all of you at some point quite a lot we're talking here about the test of time and it has been a decade give or take since banking union was first envisaged a lot has changed in the world since then so how do you think about whether banking union is fit for the financial landscape now and like are we arguably fighting the old war and actually we should be spending more time thinking about crypto or thinking about shadow banking rather than still dealing with this same from 10 years ago Sean is there an opportunity cost in terms of how much time is needed in a banking union versus the new finance right there I don't think I mean I I think today you know the Europe remains pretty heavily bank dependent if I'm honest despite my own best efforts to push crack capital markets union and to push the digital agenda I don't think they are necessarily necessarily going to make the banking union somehow relevant in in the short term or even the medium term so I think the agenda we set ourselves in 2014 to not only have you know to have an architecture which will allow us to have a properly supervised adequately managed in crisis banking sector and an integrated banking sector is the same today as it was 10 years ago yes there are changes yes there are things on the horizon we have digital we have crypto we have other things actually digital and crypto is a bit different things for banks to be honest they present different challenges but I think this does not in any way reduce the sort of the validity of the banking union argument at all but is there an argument for maybe updating us not particularly in I mean not as we have laid it out I mean you always have to be aware that the world is changing and we change bank regulation all the time but the construction of banking union the architecture we've put in place and we want to put in place I think remains valid today Elka do you think banking union is still fighting the right problems I think banking union as a concept is spot on I would not see this changing where you need to be mindful is that you keep an open eye where you might see you have always focused on this and this problem well a problem might be a different one so keep an open eye on what if a bank is failing due to something that 15 years ago you wouldn't have considered a problem like a cyber risk attack but the basic concept to have within a very integrated market one banking supervisor one resolution authority and a safety net which is the same for all of us is there what I find where we need to make progress but we have missed we have missed the boat we have not we're not fighting an old war is that capital market union needs to come in place because still it's helping the banks also to have a strong european capital market and but no I think overall banking union is as relevant today as it was when we invented it patriots you agree it's as relevant today as it was when they invented us maybe you didn't think was ever that relevant but how relevant it would have been to be already in place we saw in the crisis and it will remain relevant for all times the question is how much do we have to work on it and as I said before evolution not revolution so to make things better to sharpen things to create perhaps more predictability or transparency in the one or the other thing these are the things we have to to solve and work on and I think it's not not a contradiction to work on both to deal on the one hand with all these questions coming up with digital currencies crypto all these things on the one hand and on the other hand not for not to forget to adjust the regulation for the banking union always to the needs of the time because rena when you think about the overall priorities in the political landscape the next crisis we talked earlier about how a crisis can really gather a lot of momentum and focus the next crisis looks more likely to be in the digital slash crypto area than in the banking area so is that going to mean that a lot of the focus like gravitates towards mica rather than really the kind of political support that that they need for banking union I think we need both I mean I don't think they are incompatible we are working on both things we are you know and now we are in the negotiations on on mica Christine Lagarde came to us in in our monetary dialogue the other day and she was already talking about mica too because she said we need to do more and I'm just you know put it into you on your table so and and so that's definitely a stream of work that we've taught it you know honestly I I think of course it's a big thing for us to be able to close the mica negotiations you know we have a trial next week and hopefully so but I think it's beginning of course I don't think it will be ended there you know I think we will need to monitor this so when everything that entails the cyber security we did the Dora the digital operational resilience we have this continuous you know dialogue with the ECB on the digital euro so of course this is something we have to monitor we have to be ready you know but that doesn't mean we can do without a strong and resilient and really truly European banking system I don't think we are there yet I don't think the two things are you know substituted one for the other and so I really think that we need to to push because having a strong and resilient banking system actually will help financial stability also in the face of emerging digital risks if we have that kind of banking system that is more resilient more profitable more integrated and also capable of innovating because let's face it some of the innovation that is coming up like mushrooms that aren't regulated is also because the the banking system failed the innovation challenge and didn't see some opportunities that are others seen so I think this is where it's our job to to help the banking system to become more resilient more profitable more truly European thank you so Sean there's certainly a feedback loop there in terms of what happens say in the digital landscape and the banking landscape and the financial stability world do you see any potential for the crypto crisis to get so big that it actually triggers a crisis in the banks that would then give you the capital to kind of get banking union faster if it becomes a financial stability issue for banks I hope not I don't think so I mean because there is you know there are some languages there that no there are our languages I think we we may have been in a sense lucky that this correction and we're not sure it's yet it's a correction now happens now because we have begun to become a little bit more concerned about crypto and that space in two dimensions one has been getting bigger of course and quite and growing quite rapidly not yet at a sort of systemic level on its own but still growing quite rapidly the secondary we worry about is of course interconnections between this new part of the financial system and what we call the traditional part of the financial system and the banks not so much so far so I think if people are hoping for a crisis coming that route to build the banking union I don't want it and I don't think it's a risk in the at the moment but I think again not not a good idea to start looking around for useful risks to build the banking union now fair enough Erena we've got another question for you from the audience the digital audience the questioner says the euro group didn't agree on a work plan to complete banking union should the european parliament now take up the mantle and attempt to agree a work plan I mean we can try but unless there is an agreement at the level of of the member states you know we do have we still have the the edis proposal in the drawer you know it's there and you know I don't know maybe we can try to resume it and I have tried to talk to the reporters from time to time and see but if we don't see the political will you know to really push it I think the parliament alone it's we are co-legislators there is this co that at the beginning that but but maybe you're right maybe we should try to to try to to push enforce a little bit more and see if it works but we have tried on many other accounts and and then ended up you know stranded on the beach you know but we'll see we'll see um Sean for you I hadn't thought of this but um in order to complete banking union do we need to prevent member states from being shareholders of banks like it happens in portugal france belgium germany richley no no does anyone want to ban state ownership of banks for banking union to go ahead I don't see it really as as really a relevant issue frankly okay that's a quick answer for that oh I think we have two or three more the digital audience is very active um yes yes definitely I have tried many times after this one question we come to the physical audience where we have got hands thank you um this is for I think either elka or Sean probably what would what could be the destiny of a bank failing it's failing from a precautionary recapitalization is p o n v a new restructuring plan a liquidation I think the legal framework there is pretty easy if the bank fails its commitment within a precautionary capitalization this would turn it from a commission point of view into illicit illicit stay date and this in turn makes the bank failing unlikely to fail now this is the legal text so I think there's nothing to add unless Sean has a different interpretation I'm just also conscious of people's coffee break we will take the questions from the audience in the room with questions I didn't see a hand there from the other front if you could please if you'd like to identify yourself and your question that would be great yeah okay great hi uh Catherine Carlson I cover financial services for mlex my question is for mr berigan commission and beginners and her speech earlier was talking about the upcoming legislative proposals on crisis management I'm wondering if you can shed any light on what we might be able to expect from these I think I I've probably covered a lot of the ground that that they will cover um as I said I think what we want to try to do is to solve this problem we've had and we thought we might have solved with this framework that is how to handle those mid-sized banks that do not fit well with the resolution framework but are also difficult to manage at national level using simple judicial proceedings so we will have to I think if you read the euro group statement you'll see there are four or five areas where they suggest we should work um we agree that we should work in those areas that's probably not a big surprise since we're sitting around the table of the euro group so we will work in the area of extending resolution we will work in the area of funding we will work in the area of organization of DGS and and lease cost tests and where DGS is fit into the the insolvency proceedings but as I rena rightly pointed out these are um technical on one level but they have political implications as well so this will be uh this will be an interesting discussion thank you and we have another question from the audience uh the lady back here I think might ask one hey it's um Jodie I'm part of the capital solutions group at now with markets um Elk I think you mentioned before that there's one first step um to mutualizing which is harmonizing what are your views on the possible implementation of full depositor preference across Europe so like we have in Italy and Portugal and Greece and do you see that happening anytime soon I'm not sure that I got the question fully here might be my yes uh depositor preference I think is a topic which is part of what will be within your proposal because if you talk about funding well then you talk about a DGS to be part of the funding now you need to have some what call it even a cap called leased cost test and if you look into historic experience in depositor systems being exposed then it was mostly a pre-funding of covered depositors because out of the proceeds in the end the DGS was repaid from the proceeds of an insolvency so in a nutshell in a world of where you forget about interest the leased cost is zero this is not very helpful if you want to fund something in a Europe where full depositor preference were to exist would you see minimum emerald subordination requirements being reduced potentially the very simple answer is that the fabulous 8 percent to access the fund are part of an intergovernmental agreement so this needs all member states to agree to something else so not for us I would say in my words always all banks need to have a sound layer of capital slash emerald and then you might talk about different solutions I'm not a firm believer that I say I need to be very firm on the big boys I have an insolvency for the very small and the ones in between need to have somehow a free lunch so they also need emerald they also need to be resolvable in my words but let's wait for the proposal but clearly with the old with the current super priority of DGS's you will not get much funding contribution from a DGS so you need to think about what is the right point I would say depositor preference is a good starting point but that's my personal view I hope that has answered the question unfortunately we are just a bit at a time and I'm conscious that people's need for caffeine and also of everyone telling me to wrap up so thank you so much to my panel you've been excellent that was a very fast hour and 15 minutes so thank you so much for everyone thanks very much to our virtual audience who was great with all of your questions and to those of you in the in the room as well thank you