 Welcome to the Faculty of Economics. We are delighted to have here Mr. Enria. I leave the word to the rector of Sapienza University. We will give a big introduction. Thank you, Professor Brogid. We are chair Enria. We are colleagues, ladies and gentlemen, and most of all, dear students. It's a pleasure for me to welcome you all to the Faculty of Economics of Sapienza University of Rome for Mr. Enria's second yacht dialogue. The European Central Bank yacht dialogues allow young Europeans to engage directly with ACB policymakers by asking them questions and share their views with them. This evening, the students from Sapienza's Faculty of Economics will have the opportunity to do just this. So I wish to thank you very much Mr. Enria in the chair of the Sapienza Board, European Central Bank, that as you all know, directly supervises 117 significant banking institutions in 19 countries, 12 of which are in Italy. Andrea Enria took over from Daniel Nui, who came to Sapienza three years ago, at the beginning of 219, after a long exemplary career as a civil servant at various supervisory authorities in Italy and Europe. He previously chaired the European Banking Authority from its formation in 2011 to 2018, and before that, he also served as head of the supervisory regulation and policies department of the Bank of Italy. So, dear Mr. Enria, thank you so much for your presence here today. Sapienza is very pleased to have you here, and we are delighted to have and are very thrilled to host this evening's Yacht Dialogue. So, thank you, everybody, and thank you again, Mr. Enria, for your presence here. Thank you, and enjoy this very intriguing opportunity. So now, a few words from Fabrizio Lascenzo, dean of the faculty. Good evening, everybody. Thanks for coming. This is a very important occasion for all of us and especially for our students to have Mr. Enria here with us. It is one of the chances we are given to listen to the voice of one of the main professionals in these activities, and I want to thank Professor Broggi for having organized this important occasion. And I hope that this will be a good occasion and a chance for our students to deepen their knowledge in these topics. And I hope that our students will use this occasion in order to open their minds and to have much more knowledge on these topics for their future. Thank you very much. So, thank you, Mr. Gaudio, Mr. Lascenzo, and welcome, Mr. Enria. Welcome also to all of you present today and to everyone following the live stream on the website. Yes, okay. Sorry. Okay, I'll try again. So, thank you very much. Also to the people connected via live stream, I will start by asking a few questions to Mr. Enria and then opening the floor so that you can ask him anything you want. For this, you can either raise your hand. Some of you, I know, have prepared questions, so we will be given a mic and you can ask directly. And also people can send their questions online. You just need to follow very simple steps We are organized with Slido, so what you must do is access slido.com then you log in with the code hashtag ECB Youth Dialogue to join the event. Then you can type your questions and press send. You could also have a look at the questions from other people and vote for the ones that you like the most. So, the most voted questions are the ones which Mr. Enria will be answering first. We're going to have some questions directly from the floor here in Rome and then some questions which can be actually sent online and voted. So, of course the questions with the highest numbers of votes will be prioritized in the discussion. All the online questions will be moderated, which means it might take some time before you see them on the screen behind me. Please consider the following instructions, however. Make sure your question has not already been asked. Send questions and not comments or statements, because the idea is to make the most of this evening by asking Mr. Enria real questions. So, make the most of this opportunity. And needless to say, please avoid using inappropriate wording. Also, you are more than welcome to post about this event on your social media. You can use the hashtag ECB the Youth Dialogue and also feel free to tag the ECB and the university on your social media posts. So that, I hope, is all clear. Go to Slido, access Slido and you can actually start typing in the questions. Now I'm going to start with my questions to Mr. Enria. And as some of you know, I am a professor or here at the Faculty of Economics. I teach international banking and capital markets. And one of my core competencies in the last few years has been corporate governance. And actually, bank corporate governance is one of the most regulated aspects in corporate governance. So, my question is to Mr. Enria, how can governments, the role of the board and also shareholders actually contribute to making a sound of financial system? Thank you. Thank you very much. Well, thank you, Professor Gaudio, Professor Darshenze and Marina I really enjoyed. That's the second time I do this youth dialogue and it's really something I appreciate very much. So I look forward to your questions and to a very interactive evening here. Governance. Governance is, you're right, Marina is a very important a very important issue for a number of reasons. I mean, in general you don't find ever a bank that has gone let's say, bad, that has experienced a crisis which didn't have a serious problem in terms of governance. It is easy to say what is going wrong when the governance is not working as it should. It's less easy to identify what are the ingredients for a good governance. But I would say that in general we do have a number of criteria which have been developed in the regulations, in our practices and basically we start from very basic things. First you need people who know the job. So you need experience, you need people who can devote time to the job they commit to do. But this is also not enough. You also need people who really are willing to challenge the management. I think that's the key point to me. You need to have a real dialogue, you need checks and balances in the banks to make them healthy organizations. So you need also diversity. It's not only the quality of the individual members it's also the quality of the board as a whole. So the diversity in a number of areas, diversity in terms of experience of background, for instance we have recently people who know about technologies in boards of banks. We have done an interesting analysis recently that shows that banks that experienced serious cyberattacks or major lapses in their own internal systems were also banks that didn't have let's say members in the board that knew about new technologies. You also need diversity in terms of gender for instance. You need diversity in terms of gender for instance. You need diversity in terms of background so that's an important element as well. Of course for us as supervisors it's difficult to push on governance. If I look at what the ECB has done so far we have been very effective in pushing on capital, in pushing on liquidity, in pushing on asset quality and non-performing loans. We have started that's the only area where the scores are deteriorated actually instead of improving. Because that's an area where you don't have really very strong tools. You can try to convince, you can try to push, you write letters to the boards but eventually let's say it's very difficult for us to say no to certain appointments so the balance is mainly in the hands of the shareholders as you correctly mentioned. If you look at the money at risk there they should pay more attention to the governance and they should be really more proactive in this area. Thank you. You mentioned the ZREP cycle for this year. I know it's just finished. Can you let us know how it went? Are you satisfied? How did it go? We will have a presentation and we will see what I can say apart from the fact that several banks have already started announcing the results. What I would say is that consistently what I already mentioned let's say we see improvements in the capital position of the banks. I would say that now we are ZREP is composed of four buckets. You have capital, liquidity, governance and business model. We are now satisfied. There has been significant progress. The banks are in a good place. We ran a liquidity stress test in published the results in the autumn this year which show that the banks are in a good place also in terms of their liquidity position although we identify some issues that need to be followed up. The areas which are really raising concerns on our side and we want to come back on that and business model sustainability. There are a number of banks which are really challenged in terms of their profitability. They are not generating profits for their shareholders. They have very high cost to income ratios. They have very poor market valuations, price to book values well below unity and so this means that basically they don't perceive these banks as viable in the medium term. They are destroying value basically and in my view that's something of course as a supervisor it's not our responsibility to pump up the profits of the banks but if banks do not generate enough income enough capital organically and if they have very poor valuations that cannot go to the market of course they could be more fragile less able to withstand crisis so we are also concerned about this issue of low profitability viability of business models and we see that the banks we have done an interesting study a few years ago which show that the banks which are more profitable and which have been better placed in terms of business model are those which have refocused their business model and have avoided to do the whole the full money of banking activities but they have focused on the things that they do best so they have had a good strategic steer the banks which have been most effective in reducing cost in achieving cost efficiency and the banks which have invested more in new technologies these three elements are the elements which have really driven the banks to a place for the system as a whole what is your assessment of internal models and the discretionality which is intrinsic to pillar 2 which you mentioned Rep I know it's related but internal models are one of the differences between large banks and small banks and so it's a key point internal models are one of the casualties of the crisis but let's say I am old enough to remember also the period when internal models were introduced it was a remember just after I started I must confess I started as a supervisor when exactly in the days when Basel 1 was being approved so 1988 and I remember that there was in the years after Basel 1 there were plenty of studies that started piling up especially in the US by the Fed that showed how the banks were able at the time to basically circumvent the broad brush requirements set up in Basel through financial innovation basically and they were starting with securitization with off balance sheet activities and the like so there was a very strong frustration in the supervisory community that whenever you try to put, you know, standards relatively rigid one size fits all standards the banks managed very easily to circumvent and we realized that it's very difficult for supervisors to really catch up with the speed with which and the inventiveness basically of the financial industry so the idea which I thought at the time and I still think to some extent was to try to align to align the internal risk management of the banks and the external controls by the supervisors so we said if we rely more on the internal models used by the banks to measure and manage their risk they will not have any incentive to circumvent and we will have a possibility through regulation to intervene in their models to check that they are good enough to back test them to make sure they are robust and we will have the best of the worst in which basically the internal and external the market base and the regulatory perspectives are aligned the problem is that of course when you use a tool for regulatory purposes you corrupt its own objectives in a sense so the incentives for the banks to, you know tweak their models the capital requirements became very high and the ability of supervisors to catch up was not sufficiently sufficiently strong and so the choice that we had when the crisis came and the weaknesses in the internal models became apparent was binary I think there was a strong camp very prominent academics and at Martin but also in the in the official sector for instance at the Bank of England there were voices arguing favor of really dropping any use of models for regulatory purposes the other camp which eventually prevailed in the buzzer discussion was to try to repair the use of internal models so to reduce significantly the scope of internal models and to try to constrain them more from the regulatory perspective but still to maintain the sensitivity that internal models had and that's where we landed with the with the buzzer for actually I shouldn't say that because in the in the parlance of supervisors central bank as there is no there is only the finalization of Basel 3 but anyway the last package which is now in the pipeline tries to deal with the issues that we identified in internal models a lot of work has been done by the European Banking Authority and by the European Central Bank maybe this is an anecdote when you mentioned Daniel Nui my predecessor before and I worked with Daniel also when I was at the the Committee of European Banking supervisors in London and when we were working together we thought that we should launch joint inspections between inspectors from different countries to monitor and test the models of the banks and at the time it was a very tough challenge to get the approval of the national authorities but we were almost there we started in 2008 and the whole project sank and only when the ECB was established Daniel managed to start the TRIM project so the target is a review of internal models and which I am completing now with we finished the 200th inspection in last month so it has been a huge effort from our side but I think it has been very positive very positive for supervisors and for repairing the models of the banks and actually to your point internal models have problems but it is actually true that not having internal models doesn't necessarily mean that the bank will be safe and I know everybody in Italy is waiting for a comment on your part on Banca Popolare di Bari so we are not going to pretend it doesn't exist so just a thought on that which of course in Italy considered a crucial step as you can imagine I cannot comment on an individual case by the way Popolare di Bari is what we call what I think is not a very good term to be honest a less significant institution so we are not directly supervising the bank but of course we are kept informed by the Bank of Italy on the case I would say that in general in my experience since I joined the ECB supervision I think that the key point is that we are not yet there in terms of the effectiveness and the functioning of the mechanism for dealing with crisis I think that after the crisis there was a lot of work done at the international level to identify what are the key significant management of crisis and prevention of crisis as well of course and I think that the consensus has been around three basic elements the first one is that you need to have strong capital and to have some loss absorbing capacity so other instruments that can absorb losses at banks so that you can have some ability of private investors to absorb the losses in a crisis the second ingredient is early intervention you need to be able to intervene early enough in a crisis and the third one which I think is also requiring some further thoughts is that you need to have effective mechanism for smooth exit from the market of banks that do not work well in this area I think that we need to make an effort at the European level to develop let's say common liquidation procedures I think the idea was we will have European mechanisms for the large cross-border groups and they will go into resolution will be managed by European authority in Brussels the single resolution board the rest could go under national liquidation rules but the reality is that we have very diverse national liquidation rules in some cases the exit for the market in some cases it isn't in some case we declare banks failure like to fail and then there is no resolution triggered and also no insolvency under national legislation so we don't know what happens they remain in a limbo with an authorization to conduct banking activity so I think that we need to put the house in order a bit in this area and in my view we should harmonize much more the procedures for liquidation and we have a good example the FDIC in the US in my view is working very well they basically have a structure by means of which there is a federal authority entering the banks usually during the weekend and taking control basically then they restructure the bank and they do what is called purchase and assumption so basically they sell assets and liabilities of the banks to other banks and they limit the impact on the creditors and in general depositors, borrowers don't even notice that the crisis is ongoing because they receive eventually a letter from the authority saying that from tomorrow your bank will be named with another name and nothing changes in their relationships you have a backstop from the treasury which provides safety to the depositors so depositors don't fly away and you have also that shareholders and creditors eventually take the losses if there are losses remaining after their structuring and they manage to have the exit of more than 500 banks from the market after the crisis which eliminated a lot of excess capacity that was generated in the run up to the crisis so I think we should try to work in that direction you mentioned crisis and how to face crisis what are your views on the proposal to reform the European stability mechanism which is another hot topic right now European stability mechanism of course is a hot topic for a number of reasons that fall well beyond my scope of responsibilities for me of course the most important entry point in this debate is that the European stability mechanism with the most recent proposals should provide the backstop to the single resolution fund so to the fund that should provide support for the resolution of European banks and that's extremely important because if you don't have this backstop you wouldn't have credibility of the European resolution mechanism so I think that's extremely important in my view in general it is essential that we move towards more European safety nets for banks the other big ingredient is the deposit guarantee scheme the European deposit insurance scheme which is not yet finalized I mean we have a single currency the euro should now be clear after the crisis to everybody that you cannot have a single currency if you don't have bank deposits that are benefiting from the same type of guarantees wherever they are held in the banking union and that's the most important element and the other point is that if you don't have a common safety net so a common single resolution fund a common well functioning deposit guarantee scheme you wouldn't have authorities allowing the banks to smoothly manage their capital and liquidity in the area as a whole which means that you wouldn't have a truly integrated domestic market in the banking union you would still maintain segmented pools of capital and liquidity in each member state so if we have made this huge investment in creating the banking union I think we should push it to the end and try to complete the safety net for the banks the reform of the European stability mechanism is an important step in that direction. Last but one question from me looking at what awaits us do you think that banks can help in sustainability in the action plan of the new commission and in promoting ESG and what are your views regarding climate there's the debate regarding the brown penalizing factor the green supporting factor is it going to be pillar one, pillar two because clearly this is key and it's an area where Europe is further ahead than other areas and perhaps we shouldn't lose the fact that we are further ahead. Sustainability is one of the most important priorities of the European Union it is one of the most important priorities of the European Union is to help items on the agenda of the new commission that just entered into its responsibilities and of course everybody including ourselves as supervisors central bank has to contribute to the objective of the union. Now from the supervisory perspective we have an input in this process first of all if these if we have to move towards a major transition that is envisaged in the objectives of COP22 so between now and 2050 we will witness a major shift in the composition of our economies major transition from some sectors that will lose relevance to other sectors that will increase in relevance the financial sector will play a fundamental role in shifting financial resources and in accompanying this process. As a supervisor of course for me what matters are risks the prudential aspect embodied into this transition so it is important that banks start factoring into their risk management also this aspect of the transition and we are now preparing some guidance on how the banks should include in their risk management also the sustainability aspect. Another element which is not directly into my remit as ECB but which for instance is very much under the attention of the European Banking Authority which is very important is transparency transparency is key now that we are developing the economy almost over if I understand well of what is green what is brown what is in the middle I think it would be important to push banks financial institutions to disclose more and to allow market discipline also to play a role I've seen that some news agencies have published information on some banks being particularly exposed to brown sectors and these immediately triggered a reaction from banks announcing targets so I think this could be a very important disciplining element another area in which I think we could provide a contribution is stress testing in a sense now banks tend to look at risks in a very short term perspective they estimate their risk parameters probabilities of default loss given default in general with one year maximum three years time horizon if you talk about transition you are talking about much longer time frames and the stress test can maybe try to help banks to push banks and maybe to push supervisors also to lengthen the horizon to measure and manage risks I'm less enthusiastic at the moment about green and brown support in penalizing factors not because I'm let's say by ideology but because I think we don't have enough evidence I mean I think that prudential requirements should be based on risks and we don't have enough evidence that a green investment is less risky than a brown investment it could be in a longer term but in the transition it could also be the opposite so we need to be careful and gather sufficient evidence to decide how to move in that area I'm going to ask the last question that I will take a question from the Slido and then a series of questions from the floor so that's one last question from me one from Slido and then from the floor so what career advice this is on a more personal note would you give to future bankers or supervisors in particular giving the increasing importance of technological innovation in this field so what would be your personal advice to the students who are here supposing they want to become supervisors well let me do a little bit of a commercial for the profession because I think this is this is a job that will not bring you a lot of let's say a lot of nobody will thank you in general when things go well it's very very seldom that somebody praises you for the job you perform if something goes wrong you are the first in the line also when you don't have too many responsibilities in the case at hand so it's not if you look at it objectively the payoffs are not very balanced are very skewed but still let's say what I can say is that if I look at my colleagues also the younger colleagues who are with me now at the ECB it's a very rewarding job it's a very interesting because it allows you to combine this passion that I have and many of my colleagues have for serving the public interest with really being at the cutting edge of what is happening in the industry so you see really all the innovations all the new practices sometimes and it is a very challenging and a rich job you mentioned technologies and of course technologies are becoming more and more important we do regularly collect from banks and from supervisors their views on what are the top risks facing banks and in the last two years cyber risk for instance has become one of the top listed risks both from the industry side and on the supervisory side but also IT risk more generally there is plenty of outsourcing going on in the industry to companies sometimes in remote jurisdiction so I think it's really a challenging framework and I must also say that sometimes when one thinks about IT you think about fancy new gadgets but sometimes it's really how to manage the core asset that banks have which is information and one of the most depressing findings in my new job since I joined is how poor banks are in terms of managing their data and in terms of having integrity capability of aggregate data across jurisdictions across companies in their group I mean that's really I mean sometimes it's really a challenge but anyway I hope that some of you in the audience will consider this as a good commercial for the profession but I would say that also for those of you that instead will choose to you know to follow a career in the private sector in this area I think it is important that both sides share a strong attachment to good culture and to really to the health sustainability of the business and that the excesses of the past remain also on the new young professionals as a memory although you have not experienced this firsthand I mean you have plenty of Matigas that I'm sure you have studied in Marina's courses or in other courses to make you well aware that if you want to avoid repeating the errors of the past we need to build the industry on different premises Thank you very much so people here in the room you can raise your hand so that you will receive a mic and ask a question but I will start with the first question from Slido so Mr. Nia what do you think about Bitcoin what role do you see playing in the context of the ECB and if when Bitcoin gains even more popularity among the younger generations so what's your view on Bitcoins The EBA when I was there was one of the first authorities globally that issued a report on Bitcoin trying to identify the risks and the benefits of these type of innovations and I would say that as a supervisor let's say I see first of all the benefits of the new technologies that are underlying Bitcoins or other virtual currencies so this distributed ledger technology it's something which can also have very interesting use let's say the I also see the point that international payments sometimes especially are very remain although in the euro area we have brought the cost down basically to zero of cross-border transactions but still if you have payments internationally they remain quite expensive so I see also the benefits of having a sort of payments instrument that can be deployed globally at very low cost the risks that I saw in the construction of virtual currencies are however I mean the first one is is the money laundering controls so the basic of the virtual currencies is anonymity so there is a check through a complex technological ledger but basically it preserves the anonymity of the transactions and that is not good for the money laundering controls that are based on the identification of the beneficial owner the other point is is investor protection so when I was a DBA we made a warning to consumers that basically if you put your money in these currencies you might lose it all I would not even call them currencies actually I would call them assets of your money and this happened there have been several of these virtual currency exchanges that have been hacked and the amounts have been stolen finally the key point to me is how do you define the boundaries when these activities are banking or should be regulated and when they could remain in the unregulated world that's a very difficult question because if you start collecting something that could look like the posits for me that is a red line the posits needs to be collected by banks they enter into the money creation mechanism and they should be done only by regulated institutions okay so we're going to take some questions from the floor if we have the mic okay Si, Wu good evening I'm Riccardo Gampli a first year student of the master degree in financial risk and data analysis so my question is public opinion especially in Italy is critical about banking issues to avoid the risk of further lowering in citizen trust in the banking system I would like to know whether information and educational policies regarding the introduction of negative interest rates what are the different elements in your questions negative interest rates first of all are designed by the central bank to deal with the issue of very low inflation below target of the problems in terms of the slow recovery after the crisis in the euro area now of course this has a negative impact on the margins in the European banks but it has also a positive impact on the banks by the increase in lending volumes and the fact that of course borrowers are more likely to pay back their loans because the interest rates are of course lower also I would say that the negative interest rates policy the very low interest rate environment has favored the process by banks of disposing of their non-performing loans so cleaning their balance sheets which is also important for the banks to perform their key function which is lending to good let's say to good business opportunities now in terms of information I think that the ECB has done extensive studies, has published a lot is engaging in dialogue on these issues on the impact of negative interest rates and so I think that there is a lot which is being done and I think the same should happen also on the supervisory side on the supervisory side traditionally supervision is perceived as an activity which is bound by confidentiality you enter into contact with very price sensitive information on individual banks so supervisors traditionally do not like to talk a lot about their banks so these type of events also relatively new in the profession I must say I think that now that we have seen the impact of the crisis that the sensitivity of the general public to banking policies, to banking supervision has increased and also now that we have legislation that entails that if there is a crisis let's say the shareholders first but also the private creditors should be responsible for taking the losses for the banks as in any other sector of the economy well then you need to give more information I think and we need to be more transparent to publish more information also on our assessment of the banks and that's something that I'm putting high in my objectives Okay so I'm going to change the etiquette a little bit I would like to have the mic here I would like the students who want to ask a question to come here with the mic so it takes less time for us who want to ask questions you come down I'm going to do a question from Slido so that people have time to line up you come down start coming down and so we make this more effective because this is a large room it's going to take us ages to just get the mic to move so we have a question from Slido Mr. Enria what do you think the direct impact of Brexit would be on ECB and European Union Economics what if other members of the union like Italy decide to quit from the euro On the impact on Brexit let's say it's clear that the banks that were providing services to Euro area counterparts from London will not benefit of the passport anymore so will not be able anymore to provide services from London so are relocating and as a result of this relocation we will have 25 banks which have asked new license and other banks which have extended the licenses they had and we will have seven additional banks under our responsibility at the ECB and in general we agreed with these banks their target operating models so at the end of the transition there will be 1.2 trillion of assets of euros of assets that will be shifted towards other banks that's a big responsibility for us so it will be a lot of work that's not something that makes me happy Brexit is a very sad event it breaks the union and it's definitely not a positive development and that's something that would lead me to strongly discourage to entertain this thought with reference to Italy because for Italy it would be more difficult because of course there is also the euro dimension which would make things more difficult also because in the treaty the euro is irreversible so it would make things more difficult, it would need to leave the union so very difficult okay, thank you very much good evening Mr. Erria, my name is Francesco Gonti second year student of the master's degree in international finance and risk management banking regulation is becoming more stricter year after year which are the future trends on shadow banking regulation thank you thanks a lot, a very good question I must say the term shadow banking has entered the bit into misuse now it's not very fashionable anymore but I think that the point of let's say non-regulated institutions performing quasi-bank activities remains very relevant actually you have seen a lot of growth in the activities in the financing activities of these type of entities now does this mean that we need to regulate all of them I don't think that if something gets important you need necessarily to regulate it but you need to make sure that if you have really quasi-banking activities then you need to attract those under the responsibility of regulation I mean I don't think you should if something let's say is banking de facto needs to be regulated as a bank and if it is not a bank but it is increasing there is two banks because banks are exposed to this sector we should monitor this more carefully and unfortunately today we don't have enough information on that good evening Mr. Iria I'm Daniel Baraldi second year student management thank you very much for this opportunity my question is what are in your opinion the most important action that Europe should take in order to reach a strong economic union well for me of course I'm biased so maybe I will not take the most but the key point is that the introduction of the euro has been a historical moment and I think that we need to make all the possible efforts to complete the construction of the euro of the banking union especially of the banking union the priority for me is to have a fully fledged deposit guarantee scheme and to have really greater harmonization and the smooth mechanism for let's say managing also banking crisis we have seen how delicate this issue is for all the citizens in Europe good evening Mr. Iria my name is Darius Carimi international finance master degree and my question is how can banks improve profitability in a low interest environment without cost through layoffs and closer branches the example is unicredit and how can how banks can do that well let's say as I mentioned also before the cost efficiency is a key ingredient for banks to recover their their position in the market and to increase their valuations in the markets and to achieve a business model which is sustainable in the medium and long term and we will have now low interest rates probably for a longer period of time so I think that let's say being able to contain costs and invest in new technologies is an essential element in this strategy I think also that consolidation could be a good tool to achieve cost efficiencies invest into new technologies and have the scale that allows banks to get the revenues that compensate for this so I think that one should act both on the revenue side possibly through consolidation and through the cost side but that's unavoidable the world is changing and banks need to make efforts to get up to speed with the new market conditions thank you good evening Mr. Ria I'm Atto Zabella, second year student of the master degree in economics and communication for management and innovation I wanted to ask how the fight on duties between USA and China can affect the European banking system well it's clear that the environment of trade wars tariffs barriers between states can affect actually he is the driver of the slowdown also in the European economy and when the European economy slows down of course banks are going to suffer because of that we identified political trade tensions and the risks for European for Euro area banks under our responsibility for the next year and this will be something that we will probably look at in the stress test for next year thank you good evening Mr. Ria my name is Timur Gief I'm a second year double degree master student at the program of corporate finance from North Caucasus Federal University in Russia one of the most important expansion of the Euro zone according to the master treaty of 1992 all European union members are obliged to adopt the Euro as their sole currency but at the present there are nine European union members which have not adopted the Euro and continued to use their sole currency so the question is more European Union members in the next 5-10 years. Thank you. The short answer is yes. Actually, we already have the process started for two member states, Bulgaria and Croatia. Bulgaria has asked for joining, participating in the Banking Union, which will be a prerequisite to start ERM2 at the same time and then start the process for joining the single currency. So we have already completed the comprehensive assessment for Bulgarian banks and the process is well advanced and we started the process for Croatian banks. So I think this is a good signal that there is not only countries that want to live, the European family, but also countries that want to have stronger links with us. Good evening. My name is Li Tingkong. I come from the second year of master's degree from International Finance and Risk Management. So my question is, for cryptocurrency, do you think directly per habit the financial institution from holding and selling is a way too simple and rigid? Thank you. We actually, as EBA, encouraged regulating institutions not to engage with the buying and selling of cryptocurrencies. For the simple reason that eventually, let's say, you would lend some entry into the pool of deposits, indirectly for this type. So we wanted to keep the two sectors really separated. But I realized that this will be difficult. We know that already several banks have started engaging and lending to currencies platforms. Some cryptocurrency platforms have actually got an authorization as payments institutions in some countries. So it's very difficult to actually go to a strict separation. So I think that the Basel Committee has recently issued some criteria, some proposals on how to, let's say, treat the risk of banks when they engage into lending towards cryptocurrencies. So that's probably the avenue now. Good evening. My name is Francesca Manna and me too. I'm at the second year of the master's degree in international finance and risk management. You previously talked about the liquidation process of US. So can you add other pros and cons of the European supervisory process in respect of other countries such as US? I don't think it's very polite to say in which areas we are better than the US or the US. Honestly, I don't think that's, I mean, we are, the nice thing for the ECB supervision is that we are the new kid in the blocks, right? So what happens when you join the benefits of being a late comer is that you can build on the best practices out there. And we have built on the best practices within the European Union, within the Eurah area, but also we are built on the best practices from the US and from other countries across the world. So I think that at the moment we have tried to distill the strength. The strength of our model, I think, is especially the focus on on-site examinations. I mean, that's something which I think is very strong. And having built teams that come from different national authorities plus people, staff from the ECB, I think is a great advantage because you bring very different traditions, approaches, perspective, and then you are much more, you know, you're much stronger in the way which you can review the bank's book. So I think the on-site is, in my view, one of the strongest elements. The other aspect on which I think we are probably at the edge of the supervisory profession is in the work we have been doing on internal models. No one else in the world has done so many reviews of internal models as the ECB. As I mentioned, 200 on-site inspections and each of them going through also different models. So in that area we have gained a lot of expertise, I would say. Thank you. If it's possible, I have another question. I would like to ask you what do you believe about, if you believe in the accommodative European monetary policy and if it, this kind of policy, it's really working in increasing the bank's profitability? Well, as you know, in the ECB by legislation, you have a strict separation principle between supervision and monetary policy. It would be very inappropriate of me, but of course, let's say, being under the same roof, I strongly support the analysis, also because we have indeed the dialogue, I strongly support the stance that I think that the ECB has put forward very strong arguments for the accommodative stance that has prevailed so far. Of course, on the banking sector there are side effects and I think the decisions taken in September that has recognized the need to alleviate the burden in terms of the remuneration of the reserves at the central bank, so the so-called tiering of reserves, that has recognized that there are side effects that need to be managed, but I think that that's the right policy. Thank you. Thank you. Good evening. I'm Alberto Maria Radici from the curriculum in macroeconomic policy and financial market, the first year, and I want to ask you about the reform about the European DSM and the main discussion politically is about the presence in the board of directors of just economists, of just technical figures and not politicians, so about the reform, but more in general, what do you think, do you think that this kind of crisis, public debt crisis, should be managed more by politicians or by technicians? The board of DSM is composed of the finance ministers of the euro area, so it's actually the politicians that eventually take the final decisions in the DSM, so there needs to be of course always at the European level a decision that is taken at the political level, but it needs to be based on strong technical analysis, so it's important also of course to have good technical experts in the analysis, whatever the level, I'm talking about any let's say European institutions now. Good evening, I'm Matteo Gallone, second year student of the master degree in international finance and risk management, and during these last months some banks have started applying negative interest rates on deposits on current accounts, so my question is within this scenario who is the bad guy? Does he be with its monetary policy or the banking sector that is stuck in a sort of QE infinity scenario, and if all banks apply negative interest rates on deposits, wouldn't the enterprise sector be too weak and expose it to excessive market or portfolio risks? Thank you. Are there really bad guys here? I'm not entirely sure, of course negative interest rates on deposits is a very let's say extreme policy, you're not a customer to pay to keep your savings in the bank, but of course is an extreme policy to try to support increased spending, and again eventually it is the choice of the savers to decide where they want to allocate their savings, and if deposits will become of course not convenient they will have choices to invest in other types of assets, but anyway I understand that the application of negative interest rates to deposits is a very delicate, very delicate issue, and not all banks want to go into that territory, especially no bank want to go into that territory for insured deposits, so that's definitely something that all the banks consider of limits. In general let's say it's not we as supervisors have no say on the pricing policies of the banks, and we shouldn't have any say on the pricing policies of the banks, but indeed let's say eventually I think that in these areas competition is what should rule the game, so if somebody wants to apply negative interest rates as somebody doesn't the deposits will have let's say a choice, and for instance we see now much more at the European level a role for these platforms, these like raisings deposit solutions that are actually channeling deposits from certain countries which are which are applying negative interest rates or zero interest rates to countries within the banking union that are applying positive interest rates, so there are also new technologies that are supporting customers that want to move their deposits, the point is whether these mobility of deposits eventually could be could have some shortcomings also in terms of the stability of the sector as a whole. For the moment being it is marginal adjustments and the negative interest policies are applied only to corporates and to very high holdings, so for the moment being I think the process is manageable. Thank you. Good evening Mr. Ria, I am Federica Vato second year student of the master degree in financial intermediaries international finance and risk management. My question is what do you think in terms of European supervision about the development of the market for financial conglomerates and the possibility for the ECB to make consciousness for MNA between banks. Thank you. Well financial conglomerates, let's say we are responsible for financial conglomerates, there are many across Europe and during the crisis financial conglomerates have not performed very well to be honest and the market is sometimes skeptical about the effectiveness but there have been interesting synergies and some of these conglomerates to be honest have been rather profitable lately. So we need to actually look carefully into financial conglomerates and the types of risks that they raise, especially the distribution, the use of the bank distribution channel for insurance products and the cross subsidization that can happen between the different business lines and also the possible infra conglomerates, infra group, let's say exposures that can be and how you measure the capital of the conglomerates as a whole. So there are a number of areas which require some attention from our side. So that's definitely an important point. The second point you mentioned was MNA. On MNA again, if I look at the banking sector where it is right now there is still a lot of excess capacity. If you look at any crisis in any sector, the automobile sector, the steel sector, after the crisis you add a more pop of excess capacity via consolidation and this has not happened that much in the European banking sector. You have added it in the US banking sector but not as much in the European banking sector. And if you need to invest in new technologies and I think that some consolidation will probably need to happen. Of course we as supervisors when we look at the merger project we look at the viability of the business plan and whether the bank will be able to respect all the minimum requirements throughout the process. There was until recently a perception that we as supervisors are actually preventing mergers from happening. So I'm trying to dispel this assumption that we are against merger. We are not but of course in order to be approved they need to be sound and have a strong business project. Thank you. I'm going to take a question from Slido which is I'm going to read. So Mr. Nerea which are the past, present and perhaps future most challenging issues in banking that you experienced. So past and present you have experienced and things you envisage for the future. Well in the past I would say without any doubt I remember I started the EBA in 2011. We started the stress test beginning of March 10th of April. Greece started the sovereign debt crisis and it had a private sector involvement in July when one week after we published the results of the stress test. That was a period that I would not let's say live again if I can. Present I would say that the issues we were mentioning before are the most important ones. So really the challenge now for me is really the low profitability in the banking sector and the need for restructuring. How to drive the sector towards more restructuring to become again positive in the view of investors able to attract investments capital and become viable in the longer term. And future, well future challenge I think at the moment I think still digitalization ranks high. Of course sustainability is also another important challenge. So the two challenges are both very high but I would say that the moment the one which is going to challenge both banks and supervisors most in the next two, three years I would say is digitalization. Good evening. My name is Andrea Franco. I'm a second year student of international finance and risk management master degrees. My question is what is in your opinion the solution for the banking market segmentation in Italy. Thank you. Well we have, first of all let me say that the Italian, Austrian and German banking sector have been traditionally the ones which have had the widest range of very small institutions. Often cooperatives sometimes savings banks. That's not in itself a bad thing. I mean it's an elemental strength of the European banking sector having an ecosystem that has a number of different players. But of course in times of difficulties and low profitability there could be challenges specifically on these business models and they think that the steps which have been taken in Italy and in other member states to integrate more this sector through initiatives that have created a sort of sector-wide merger or light merger like, I mean in France the credit agricultural group or Rabobank in the Netherlands, Rapheisen in Austria, the Volksbank and group in Germany and now also the two new groups of Bank di Credito Cooperativo so Icria, Casa Centrale Bank. I mean these are interesting examples of how to benefit from integration and consolidation while at the same time maintaining also some aspects of local expertise and local knowledge. So I think that that process is very interesting and that's the way in which you can also move towards less fragmentation. Fragmentation is also unfortunately now an element that is associated with the flag. So you have a lot of segmentation of markets between countries and that's something which in my view is also, I mean for me is one of the biggest priorities, I mean how to foster really the development of the banking union into a truly unified domestic market for banks and that's still a challenge. I mean I might speak for, talk for hours on that but I will leave it here. Thank you very much. Thank you. Good evening Mr. Ania. My name is Xinru and I'm an exchange student from China as my serger in venture in finance and my question is nowadays in China we talk about the euro economy and we mentioned debt crisis. So how do you think that why the the euro economy is easily attacked by debt crisis and how will the single supervisory mechanism raised by ECB will alleviate the problem? What you have seen in the during the crisis was that shocks that hit a specific member state in the in the euro area started a loop between the banks and their sovereigns. So in some cases like Greece and Portugal it was the sovereign that was actually affected by the shock and the banking sector was contaminated via the exposure to the sovereigns in Spain and Ireland it was the opposite. It was the banking sector that deteriorated and the banking crisis triggered difficulties for the for the member state, for the sovereign, for the fiscal position of the sovereign as a whole and this generated a major let's say major concerns about the overall stability of the of the of the single currency and integrity of the single currency but since then major steps have been made to repair these problems. I mean the european stability mechanism which has been mentioned as one of the of the key issues today is one of the tools which have allowed support in certain member states and avoiding let's say outright default the banking union and the centralization of supervision and resolution at the european level for the largest banks in particular is another important step. The deposit guarantee scheme is still the third leg of the of the of the union which is which is missing and as I said we should make some progress in that respect but now the the the euro the architecture for the euro is much stronger than it was and although I would say that we should not be too comfortable with the current state of the art and we need to continue strengthening and completing the banking union if we want really to avoid this type of crisis in the future. Thank you very much. Good evening, I'm Atto Benigni for Seattle French Risk and the Denialities. As my my question is as soon as the mandate at ASB expires having the opportunity to choose between renewing your position or return to the bank of Italy what will you choose? Well first of all I'm one of the of the few that have already returned to the bank of Italy because I was first at the ECB in the early 2000s then I was in London at the Committee of European Banking Supervisors and then I came back to the bank of Italy in 2008 just a few days before Lehman I must say so so I'm very attached still to the to the bank of to the bank of Italy I learned my my profession there and I'm very attached to the to this I must say that when I finish my mandate here I think I could enjoy some time of rest if you allow me so so but then then then I mean I will I will be open to you know other other jobs at the national and European level I'm most attached to the European project of course but I'm most attached to Italy as well. Thank you. Good evening Mr. Aria and I'm going to invite Bersani first year student from the Master's Degree in data analysis so my questions are what are the tips you would like to give to students to pursue a prestigious career like yours and in addition how did you imagine it to be a work within the European Central Bank's Supervisory Bird and how would you rate your work from January 1st 2019 to today thank you that's that's a big question I think that you need really to to follow your I mean to I mean in my view integrity is an important part of this job you need really to sometimes also take responsibility take risk when you see something that is not going the right direction you need sometimes to take also risk in an organization to really go up in your career you need to be really yourself sometimes when you when you start as a young person in a career you tend to conform you know you tend to see what the others around you do and you tend to try to you know move with the wave I would strongly invite you to make up your own minds on things and speak up always and this usually in the long term pays I mean you can also some moments in which this doesn't pay but in the long term I can tell you this in this space and if it doesn't pay maybe the job is not worth for you in terms of the job and the job at the ECB I mean it is it is most rewarding first of all because I must say that it is an extraordinary work environment very young ECB supervision is very young much younger than the rest of the ECB much more diverse also in terms of gender and origins and and you have a lot I mean there is this vibe still of the startup the startups I like startups I've done the ECB mark 1 in 99 I've done the SEBS I've done the EBA and I've done the ECB supervision few years later but still a startup startups are very nice because you write on a on a white sheet of paper now you don't have the burden of tradition of the past of doing things as they were always done so you can really write things from new and that's really exciting and again the people is very passionate about the job of course I don't want to sell this is the best I mean it is a bit heavy I can tell you for me for sure it's it's it's a very heavy job and if you feel the responsibility for what you do you don't sleep always very nice very very well at night but it's it's a very rewarding job good evening mr. Maria my name is Andrea so when I work in the fund sector of a data provider in my job I analyze key investor information documents and sometimes there are funds which have the score ESG even if the issuer is not an ESG company so my question is can as a president of the vigilance council for AC ACB can we consider our funds ESG even if the issuer is not an ESG company or it is necessary that the fund and the issuer are both ESG thank you as you know I'm not in the fund industry so I would not go into the the details of this but let's say that we need to to develop jointly clear criteria I mean because it's clear that now the sustainability is becoming such a big issue there will be a tendency to wrap everything as ESG is sustainable and the like we need to be to have clear criteria is on what qualifies and what doesn't qualify I think the first important step was to develop a common taxonomy and that's what I understand the council and parliament should have agreed in the recent days so I hope that this step is almost completed once this step is done we should have the supervisors in all the sectors in banking in insurance in the asset management industry to develop clear criteria to have more disclosure and to avoid let's say greenwashing type of practices prevailing in the market thank you I'll take a couple of questions from Slido so what is your biggest motivator in your day-to-day job so you talked about integrity but then what wakes you up when you're not awake at night which we heard is one part of the job when you went up so what is your motivator what drives you well I must say that Europe for me is a big driver I mean working for Europe is an element of extraordinary drive I remember when I started attending the meetings under the European Monetary Institute the precursor of the of the ECB a meeting and working together with colleagues from other central banks and developing a new institutional construction which was able to bring together Europe in a new way I mean I think I found is always fascinating and reaching and and very very motivating so that's what still drives me let's say almost 40 years after okay I think technology failed me because I think I missed a question which had more likes and so I must get it right so what do you think about the Deutsche Bank situation which had 17 likes whether whereas your day-to-day motivator only 16 of course it's very difficult for me to as a supervisor to speak in public about an individual bank and I usually decline these type of questions but what I would say simply is that Deutsche Bank is one of those banks that had clearly an issue with the the viability of the business model and the perception of the market on the long-term viability of the business model the low market valuations reflected that judgment and the bank is now engaged in an important change in in in their in their in their in their business model and we have been pushing and and accompanying this change well since I'm very conscious of the time thank you very much again Mr. Ria thank you everyone uh yeah well we we don't have time so thanks everyone for such an interesting conversation for the questions and discussion I hope you all enjoyed it and leave the event with food for thought and possibly may I encourage you to become supervisors or bankers good supervisors or good bankers because I think banks play a fundamental role in the economy they are part of the plumbing for the economy so we need good bankers but before you go I would like to ask you to access Slido one last time to answer very short feedback survey and let us know your opinion on today's ECB youth dialogue before a big round of applause for Mr. Ria thank you very very much