 Good morning and welcome to the second day of our joint ECB and SRB event the test of time banking union a decade on Yesterday we took stock of the banking union drilling down into the next steps for crisis management and the resolution framework And we also had some interesting insights into what's coming next what the future of banking might be Today we shift our focus from the regulators to the banking sector itself Of course the heart of the banking union first We will hear insights from KBC chief executive officer Johan Tice and then turn to a panel on how resilient European banks are As yesterday we invite you to comment and ask questions via the mentimeter tool And you can see the details of how to do that on your screens With that let's get started. Please welcome KBC's Johan Tice and don't forget to send in your questions for him Mr. Tice so good morning Mrs. Koenig, Mr. Andrea ladies and gentlemen first of all, thank you very much for for having me here It's a great honor great pleasure Not every day in occasion to speak to such a large audience. I was not aware that 3,000 people are watching us So I'm pretty stressed But anyway, the financial crisis and its wake the European sovereign that crisis clearly illustrated the major impact of the financials in this services industry on on the economy and The reflex of member states protect national interests and their own banks confronted us with the fact that European market cannot do without an advanced integration of its financial sector No doubt about that the progress that has been made in creating a European banking union since 2012 is Positive and it's resulted in more robust healthy and stable financial sector in Europe Our recent experience with the pandemic has been a case in point and one might say That is due to a massive intervention from public authorities or central banks true But still in this case the commercial banks were part of the solution Whereas in 2008 the commercial banks were part of the problem. Now. We should not take this accomplishment lightly Because implementing a common supervisory and resolution framework for the biggest financial institutions in 19 countries in the eurozone Each with their own structure is which their own culture each with their own operation performance is quite an achievement So congratulations. It was also a highly needed achievement if I may add Because I'm pretty well placed to admit that in the years leading to the financial crisis banks commercial banks have made serious mistakes As I said There's no doubt that the ECB and the SRB have done an excellent and thorough job We cannot however Stay blind to the fact that a lot of work rate remains still to be done to mitigate several existing flaws And we have should we should have ambition to complete the work or to say it with the quote of a book Let's move from good to great So let me share with you some critical reflections and I do apologize in advance But the goal of the banking union is to create a robust and resilient European financial institution by implementing a comprehensive package of risk reduction measures This should safeguard national government's budgets from being jeopardized By a potential failure of too big to fail banks Today both the single supervisory mechanism and the single resolution mechanism Contribute to this goal of creating what is called a level playing field in the stable financial sector in their approach Both ECB and SRB do their utmost best to treat all financial institutions equally starting from the concept of a level playing field now in its Setup, this is a clearly logical step and both the ECB and the SRB are Applying this strictly to avoid. I think any legal mistakes because let's face it Europe is quite complex And I fully understand that position But what's the definition of a level playing field and can that interpretation of level playing field vary upon circumstances next to that and often hear that the downside of constantly using the so-called Benchmark as the reference for all or for some policies of the industry is Putting the bar at the level of the average of the industry I would even say it puts the bar at the level of the weakest banks and in my opinion the approach Pays insufficient attention to as I would call them positive outliers. If if you want to negative outliers, so let me illustrate what I say that and let me use a quite controversial Example Let me refer to the dividend ban for all banks in the early days of the COVID pandemic One could argue this to be justified as A precautionary measure because it has safeguarded the stability of the financial industry during a very stressed period of the economy And I fully agree it has worked out But was it really necessary and to me an easy one now to say with hindsight No, perhaps we could have done differently because let's face it. There were some well capitalized highly liquid banks profitable banks and Perhaps the measure which we have taken has caused in that perspective some hampering of the free market approach And for sure it has definitely not supported any potential consolidation of the financial industry in the European domain Consolidation which is so strongly argued for by the ECB So it's a quid pro quo In my view to strengthen European banking landscape once a certain level of stability has been reached and I repeat once that Level of stability has been reached a common denominator for a sector benchmark approach applied by a supervisor is not Necessarily the right way forward If a business model proves to be superior to another if an institution to be Shows to be better performing Than others this should perhaps be more recognized And the opposite is true as well if it do was it should be recognized as well And let's face it in Putting everything at the level of the benchmark. It might create a significant concentration risk as well Now centralized potential supervision has reshaped and harmonized How do you resume significance? banking institutions are supervised and has further aligned the application of EU's single rule book at the same time centralized Recovering a resolution planning as well as dedicated European Eurozone level resolution fund provide Confidence that a crisis in a systemic bank can be managed efficiently and without cost to taxpayers So notwithstanding the centralized supervision at the European level National regulators and supervisors continue to play an important role Both in sharing and shaping regulation as well in day-to-day supervision as These national authorities have an understandable national tendency to give priority to national interest this implies that on the field The banking union is not yet as much as reality as one could hope for ring fencing is still alive and kicking and You could say it's a bit more subtle than it was before for good reasons now regulation is still Interpreter differently across EU member states Resulting in different practices in day-to-day supervision across the EU Now we as commercial banks notice a clear difference in the interpretation of regulation between different member states Being CEO of a group, which is across Europe under SSM northern as as an SSM countries We clearly make we clearly notice their difference and a certain discrepancy between non SSM member states is Understandable to a certain extent But even within SSM countries We can't help notice that European supervisors turns a blind eye when it comes to aligning the implementation of European rules And we wonder why Although we agree that robust and healthy banks are necessary to create a safe financial system that can absorb shocks and crises We must always keep in mind that We act in a competitive global market and that providing financial services to the European economy should be both convenient and Acceptable prices for our customers because that's the reason why we are here We are not here for us. We are not here for us supervisors. We are not here for us commercial banks Now a strong EU economy Requires healthy and competitive banks and that's what it starts with. This is something that should be considered More regulation more in supervision more by us. I have a Clear message in this respect Please do cut the red tape The enormous complexity and disproportionate amount of information required by the supervisor comes at a significant cost For the banks probably for you as well and therefore the overall economy is hampered as fact as well it is of utmost importance that this money is well spent and To illustrate a little bit Let me give you a couple of examples The first example I would like to refer to time and energy consuming fit them proper process Proceeding denomination for instance of a director to the supervisory board or a member to the executive committee or whatever member and an appointment of a senior general manager in very specific roles This process is lasting months and I'm not speaking one or two months. I'm speaking about a multiple of that number and in the meanwhile Those positions are vacant and we are waiting same can be said about the Yeah approval process of acquisitions and you know next to the very cumbersome and sometimes very painful administrative Process which goes along with with that approval process the throughput time of such an approval process is very long and Very long now I'm the first one and I think all my colleagues will follow to recognize the complexity of such an approval and the importance of doing it Right. I fully agree But does it need to take so much time seriously? You know, we need to be aware that the acquired company the acquired assets the acquired liabilities The employee and the employees and that acquired entity are during during the long approval process Subject to scrutiny by the markets scrutiny by the competition And this leads to financial impact for the acquirer. I know one could say so be it. It's your problem. I agree But it also may lead to destabilization of the acquired Entity and that's no longer our problem. But it is our problem. You include it another case in point KBC is required to deliver 5,880 reports and templates to the authorities supervisory authorities. Let me repeat almost 6,000 reports It was 4,700 three years ago. So it's an increase of 20 percent, which is quite a lot even if the number 4,700 was a lot in itself Now there's enormous workload implies a significant financial cost and to illustrate to create all those reports I mean the system in itself not the generation of every every a single report of every single template KBC has set up a project with a total investment cost of 200 million euro and counting Now interesting to note that in times of crisis We have expired a couple of them in the recent past We did not use a lot of those reports and The same is true for the supervisors. They only use the limited number of those reports And I would say, you know, I could count them on one hand the fingers of one hand perhaps the fingers of two hands But still why do we need to issue all those reports? What concerns me even more that is a potential next step The supervisory authorities may request tomorrow access to the underlying database which Yeah triggers an interesting point of discussion but It allows them for sure to distill out of that data their own reports and Present them or at least the conclusions derived from those reports or those data analysis to us And this would what I would call this kind of Reporting I would call it direct reporting. This would create a very strange reporting strangled Because you know the outcome and interpretation of any kind of report of any kind of template is strongly depending on the knowledge of the underlying businesses and Therefore is not necessarily unique This would often lead to what one could call reconciliation problems with us and as a consequence a lot of extra labor to be done So I'm not necessarily a fan You know anyway, it would generate potentially for both sides an extra cost and what's the added value? Now the fact that different authorities require the same or different information Without proper coordination makes a bank often the object of an international and an institutional ping-pong game ECB and SRB sometimes take opposite stances on the same problem leaving banks in limbo how to deal with the situation Being the CEO of a group of 45,000 employees. I Sometimes wonder if top managers me included knows what's really going on on the lower levels at the lower levels of the organization When people in the big organization well intended Execute tasks within the framework set by top management The outcome and definitely the way how the work is delivered may differ from the original intent I'm still speaking about my own institution But why would it be different at supervisory authorities? Why would it be different in supervisory institutions? Too often it is set by senior officials will intend it that according to the information provided by their own Organization that nothing is wrong or that banks are exaggerating but believe me There is a significant proportion of Inefficiency embedded in the current supervisory system, and I started with saying that you guys are doing a great job Finally the banks organized the way banks organize and operationalize their business models should not lead To unfair regulatory consequences for financial issues and depending on the way how they are set up Even if the underlying risks are exactly the same And in that perspective I also support to call from the head of the UK prudential regulation authority to Simplify the capital requirements framework and to do away with an array of extra capital Cautions such as pillar to add-ons by supervisors capital conservation buffers and counter-cyclical buffers How can we get forward? We all know that piece of the puzzle of the European Banking Union is still missing Edis European deposit insurance scheme for bank deposits in the euro area Currently, we still have different national deposit guarantee schemes We all know and this should be resolved by introducing that overarching European scheme Which then would provide a stronger and more uniform degree of a year insurance insurance cover Ensuring that the level of deposit are confident would not depend on the bank's location as a consequence on the member state Therefore we do regret that Europe Europe groups in recent recent initiative to revamp the project has been put on hold by the member states And we hope nonetheless that further progress will be made in the near future Now although we are in favor of adding this essential third pillar to the banking Union framework Let me raise a couple of intention points First of all, I'm wondering what happens to the contributions that already have been made to national guarantee schemes regardless If the local governments have set them aside in a separate fund of not And this is of course not a message to you, but this is a message to other people as well Will be to build those funds be transferred to European level question mark and we're talking about big amounts Secondly, it is implied solidarity between all the banks of the banking Union That's why it's set up. Although the difference in risk profiles between those financial institutions can still be quite significant Hence, it is my opinion that Solidarity cannot be achieved when there are no equal obligations in terms of capital requirements of risks that bank take Particularly for example, if the amount of bad loans is not cut by us Below a certain threshold or if sound profitability levels triggered by us are not achieved So complimentary to the banking Union, it's paramount that we further step into the integration of Europe the integration of European capital markets Divergence in national regulations and taxation regimes hamper the creation of European capital markets Union and we know that it is a patchwork of of tax systems indeed in Europe, but Strengthening a real banking Union needs to have a more uniform financial or capital markets Union and Today European companies are disproportionately reliant on banking financing in comparison to the markets such as the USA Now the creation of a capital markets Union would therefore provide an opportunity to balance the scale and lead to a healthier Financially financing mix and the definition of healthier leave up to your interpretation As a side note I would like to add that the much hard reference to the US capital markets as the ultimate The ultimate final outcome for the EU Does not take into account the specific setup and features of the different markets Example giving the regulatory context in Europe is completely different than the US capital markets On top of this The reality of financial services evolves quickly and our regulators supervisory framework needs to keep pace new actors in the field of decentralized finance digital currency stable coins crypto I mean they are disrupting the financial services and in order to main To maintain stability supervisor regulators must take these into their scope into their attention Fortunately awareness amongst regulators Supervisors is rising as illustrated by recent statements by the national supervisors amongst which DCB amongst which also fat Bank of England and I can continue but We need to move faster and If he would allow the new marketplaces not new market players, sorry to roam free The risks of a new financial crisis would become much more imminent Building upon this topic. I grant Lee support and I greatly support ECB's effort in creating a digital euro Or what is then called the central bank digital currency? It's my strong belief that the current evolution towards digital money is inevitable and It would be wise to acknowledge this by all of us And I will repeat us means including commercial banks for good understanding I'm not referring to the so-called stable coins, but I'm really referring to Digital money issued by central banks and having the legal status of money In my view central banks should take the lead into developing a digital currency One that central banks control themselves. I Would say one which allows to build an economy upon Discussions on the position of the commercial banks in such a system is of course part of the debate. I agree and Let's say it differently. Let's not drag our feet because let me clear private players Across the globe big tags or not Will not hesitate to take the place of our monetary institutions when they are offered the opportunity Nonetheless, we should remember that significant benefits that the banking union could deliver to European citizens like a chair a Different one than these ones in the room But like a chair the banking union needs each of its legs to be strong and balanced It is if it this should be working as it should Now I have had the opportunity and the privilege to witness the unfolding of the EU banking union project From the front row as a CEO of KBC group since 2012 a lot of achievements are a fact and As I said a lot of achievements can be qualified as good But a lot of challenges are on the road in front of us I realize and I apologized in advance that some of my comments may be highly critical on certain topics but we Commercial banks and supervisors are having the same interest and I'm working together better On the level of equals We will be able to tackle successfully the upcoming challenges to the benefit of the European consumer and Corporate institutions Thank you very much. Ladies and gentlemen Thank you very much. Mr. Tais We have a couple of questions from our online audience, but first I'll see if there's any questions in the room any hands raised I Don't see any so we'll give the preference to our online audience So coming back for your remarks about fit and proper and acquisitions. What would be your proposals to make those processes lighter? I mean first of all I said it's not an easy process a complex process and we have to take into the supervisors have to take into account a Lot of measures Obviously, you have a huge amount of difference in the different regulations of taxes and so on support but for the strict approval process Where I'm referring to Not necessarily anti-competition but the strict approval process of the ultimate ownership and so on support that process can be significantly speeded up Definitely when financial institutions have been on a Recent in the recent timeframe doing exactly same transactions sex the same acquisitions That process can be easily easily copied on the back of what was experienced six months eight months twelve months twenty months before and you know It looks perhaps exaggerated But we are talking about processes which goes nine months twelve months And then that's in those circumstances We need to be aware that the acquired assets, but I said it as well the acquired staff Including the swap the staff of the acquired entity is underscrutin and sometimes the administrative process to burdensome Thank you very much. Any questions in the room Fabia Thanks a lot Just one question You mentioned the integration as something that is needed further integration my question would be Given the regulatory framework are the banks also leveraging as much as they can on the framework To move in that direction. Is there something more that you can also do with the with the current framework? Yeah, I spoke on several occasions on integration. Which specific part are you referring to? More cross-border activities more European So I think indeed. Let me first say something Which it perhaps pretty strictly personal and not necessarily shared by colleagues. I'm not convinced that big is always better For good understanding. So in that perspective Integration consolidation and so on support. Yes, okay, but it needs to fit the purpose So I'm personally more convinced that when it fits the purpose and purpose can be on different occasions strategic I mean the ultimate goal is to serve customers better and to have a stable financial issues so we can guarantee the long-term Purpose which I just said so if you if it makes sense from a strategic perspective It makes sense from a financial perspective creating stability income profitability can be translated and higher capital ratios and higher Returns ultimately to your shareholders and then a good service to your customers if all those boxes are ticked consolidation makes sense and in order to facilitate and I Assume these to be European in general is indeed fostering the same position if those boxes are ticked the system should facilitate Now what's the system the system is the regulatory party supervisory part for sure But also the political part also the tax system and so on support and then within Europe We have quite a lot of differences which hamper that I touched upon one of them That is how to protect the deposit of policy of deposit holders within the European frame. This is fundamentally different So if you go into a consolidation often we are asked financial issues confronted with those difference which hamper integration Thank you very much and maybe a last question It's quite a broad question But you mentioned you have been in the front seat watching the evolution of the banking union since its conception So if you had a magic wand, what would you as a banker wish to see from politics and regulation for your industry? and the consumer In in brief over half an hour now and you have brief I think you know and I'm twisting it from both angles So I'm testing it from the angle of a commercial institution, but also from the angle of a Supervisor let's work better together. I Think we all have the same goal You know, we're on the same ship and the same ship is providing financial services to fulfill customer needs And if we understand good from both sides, what that means from our side I mean, let's face it. We need to be able to generate capital So we create stability so we can get at the to our deposit holders and so on that we will be there even in a moment of crisis If we fully understand that grasp that position and supervises facilitate that in a very effective Also effective in terms of administration so on way of working then I think we're both doing things together So it's not they should but as we should fantastic. Thank you very much. Mr. Heis. Please. Thank you