 Good afternoon, I'm very pleased to welcome you to this IIEA webinar. We're delighted to be joined today by Isabel Vaillon who has been generous enough to give us time out of her busy schedule, while it's unfortunate that she is not able to join us here in person for obvious reasons. We are nonetheless delighted that she has agreed to speak to us today via webinar. Isabel will speak for around 10 minutes with introductory remarks and that will give us plenty of time for a Q&A session. The event today will be slightly shorter than our usual one hour events. You are very welcome to join the discussion using the Q&A function on Zoom which is at the bottom of your screen. Please feel free to send your questions and your comments and your thoughts throughout the session and I'll keep an eye on them and put them to Isabel as they come in after her presentation. A reminder that today's event, both the presentation and the Q&A are on the record. By way of context, the banking sector in Europe are very important compared to the United States. It's more important for the functioning of the European economy than the American economy. Companies use bank financing more than capital markets financing in Europe. Households put more of their savings into banks than in the United States where other forms of savings, products and more are more prevalent. That means that banks in Europe, most countries are considerably bigger in relation to our economies than in the United States and many other advanced economies. This makes the regulation, the functioning of the banking system particularly important for our continent. As we saw in 2008 when things go wrong with the banking system, the implications for the wider economy, for people's livelihoods, for people's general well-being is enormous. In that context, banking has always been a highly regulated business and has been more so in recent years since the financial crisis and Isabel is central to that in her role with the European banking authority. But for quick formal introduction, Isabel is responsible for delivering the EPA's potential and resolution policy work as well as overseeing the implementation of the standards of standards with a view to ensuring a harmonized set of supervisory and resolution approaches across the EU. From 2011 until 2018, she was responsible for the EPA regulatory framework. Prior to that appointment, Isabel was head inspector for onsite examinations at the French Financial Markets Authority and prior to that she was deputy director of the European International Relations Department of the European Regulation. Okay, good. So without further ado, Isabel, and for your many, your hugely wide experience, we look forward to your opening remarks over to you, Isabel. Thank you very much Dan for your introduction and kind words. So I'm very happy to discuss with you today the post crisis regulatory reforms and from my perspective, the need to push for completion. So I would first like to thank the Institute for International and European Affairs for inviting me to discuss this topic. I must say that I remember I have been with you I think more or less seven years ago, but obviously was in a very different setting in a room close to the harbor. So something very dear to my memory indeed, and I wish we can reconvene more physically in another in another time but as we meet today in this virtual and sometimes even more effective manner. So I'm very happy to first well highlight that I sincerely hope that we are at the beginning of the end of the most traumatic health crisis that any of us would have seen in our lifetime. And at the same time, while we take comfort and encouragement from the resilience of frontline workers in Ireland I'm sure and all across the union. And that is the reason of whom, well, deal with this enormous unprecedented challenge. I would say from the more narrow corner of my remit. I think we can also take comfort of the contribution and resilience of the banks in this period of time. There are clear differences, the magnitude of the challenges that we now face will undoubtedly evoke the memories of the old financial world crisis in 2008. I think it's my duty to exchange with most of you to make sure that the brutal beliefs in how the system operated and that were torn apart at the time. Now, well, offer much better resilience. So, indeed, the events that were set in motion a decade, a decade, a long process for the reform has now transformed, in my view, our approach to the regulation as well as supervision and resolution of banks. I think also you would concur with me that these measures have are now showing their values. And it is all the more important to acknowledge that the process is not yet complete. And in my view the COVID-19 has the potential to generate further stress obviously. It is not yet there at least of the economic and financial crisis, but it is also a window of opportunity for us to use so as to push the compression of the reforms, which will in the end deliver their full value. So this is with this in mind that I would like to take say 10 or 15 minutes for discussing with you and presenting my views. Of course, much has been written over the years about the origin and causes of the global crisis. It is now clear that there were also many contributory factors. Of course, we remember the low inflation, stable growth, which have widely held belief that we were in a period of great moderation, we call it at the time, where factors such as structural changes in the economy, improvements in the understanding of the monetary policy, gave rise to some certainty and maybe too high comfort. Rather, it also gave rise to a period of excessive risk taking we know, coupled with innovations in the financial markets, and it meant that financial stability risk were not clearly understood. I would make kind of analogy. It's a bit hazardous some that analogy, but what I see that we may be in some manner going through a similar thing. We know that there are many, many innovations, they are multiple, and they have been accelerated during this crisis, probably for the good, but on the other hand, risks are even more difficult to evaluate with the high uncertainties that we are going through. And that's why we definitely need to consolidate the structural framework that we have been building. One other aspect of the reform that we conducted also showed that it is clear that the system of regulation governing banks had become at the time, far too relaxed compared to the conditions that we went through. We know that poor governance had seen banks pursuing high short term financial targets, probably at the expense of prudent long term strategies, for instance, or capital, both in quality and quantity had been reduced rather thin that facilitated excessive leverage. So this picture, on the contrary, seemed to resound very strikingly different than from the time that we are now in. So given the reforms, at least a shift from the financial side in particular, we can expect to be on much better ground. Finally, in this aspect, I would also highlight that there was chaos at the time, which exposed the absence of proper crisis management procedures. At the time, there were hardly some technical directives able to deal with some aspect of the failure of the banks. Nothing to compare with the complexity of the resolution of the financial system that we had to go through. This is where we experienced the full complexity of this resolution process, that in the end, we couldn't understand better and led to a more holistic framework. But this is where probably despite the end result being the losses incurred by banks were, say, socialized. The legislators went back to the drawing board, fundamentally recast the regime, and some key missing parts of this of this regime are still to be approved. So this is what I take of the need for the reform that we followed suit, basically. So there has been indeed a decade of strengthening. I would claim that the benefits of this strengthening has up to now helped us navigating this pandemic crisis. So at EBA, as part of the European financial system of financial supervision, we are very much keen on supporting the final development of this decade of strengthening. The structure has seen a shift away from national regulation and the introduction of a standardized approach for the oversight of the financial sector. In terms of prudential framework, I think everybody will agree, the situation has changed substantially on capital, for instance, just before the pandemic. The average common equity tier one was around 14 and 14% or nothing to compare with the 9% of 2009 approximately. And even at the end of 2020, this capital ratio reached more than 15%. This regulatory regime has indeed added the buffer's requirements that probably were needed. We know various forms, the systemic risk buffer becomes a cyclical buffer, the conservation buffer, maybe a lot of them and we can discuss this point. But in my view, very importantly, this is this buffer function that has allowed the authorities to apply the flexibility that was needed at the time the pandemic struck. So we must have, we must conserve, we must continue with this buff crash function one way or another, even if we would, I would like to simplify it. The same applies with the liquidity buffers, we can discuss why they are so high as a matter of fact in Europe, we know it's more than 170 something like that right now. So much above the 100% requirements. So there is something to look into that, obviously. But again, this is why I think we can say, hopefully anticipate that the crisis when it will fully blow up. Will not fail banks because of liquidity absent. A bit more difficult in the crisis management area. Of course, the Bank Recovery and Resolution Directive, the BRD, which came into effect in 15, sorry, has it now established a modern framework in the EU for dealing with failing or lacking to fail banks. All the jurisdiction have competent authorities dedicated to the resolution. We are dealing with the planning of the failure of banks and the execution of such a plan. At the EBA we are extremely attentive and very active to make such plans realistic as well as operative. We still have some progress on the operational side. But again, against this crisis of the COVID-19. We can make sure that the banks are much more, are much better equipped, be it for handling hediosyncratic or at European level for systemic failures. So I think we have taken comfort of this up to say this very first year of the crisis. Probably the efficacy of the measures can be discussed. It's difficult to compare obviously to the previous crisis. But if we take the a contrario reasoning should have we had the same capital buffers of the time or the week liquidity of the time, probably we could not have even gone through this first year as we have been. So the counter cyclicality abilities are there. They have smoothed this first year of the crisis. There is still some ability to use. And this is where I would like to come in the first part of my intervention to do. So what remains to be done, probably I would like to highlight a few masts. Certainly there is no room for complacency. The government supports have been deployed over the last year. And we know that they will fade out. Obviously, all governments try to make this fading out as smooth as possible. In as much as this will occur, it will, it will probably go with a higher level of non performing loans, which will increase. We have not yet seen this or very marginally, but banks that enter the crisis with lower capital level for business model sometimes or riskier exposures will definitely face challenges. So this is why it is still the time to read all the efforts, not just manage the crisis, but complete the big picture that we had committed to and completing the goals and ambitions were so evidence at the end of the previous crisis. In the banking union. Well, of course, there is the pressing issue which is to deliver, which is the need to deliver the common deposit insurance scheme or the edis. This third leg match has been done, not to not the least the adoption of the risk reduction measures package. This package I would highlight has given the EBA over 100 mandates regulatory products. So this may seem a lot they are small and big things there, but mainly in the areas of governance remuneration also large exposure resolution, as well as disclosure also some very important features of the improvements of the regulatory framework are there. So the vast majority has already been delivered. And it probably helped in having quite improvements in the risk metrics that we could go through in navigating this crisis. So, compared to this big achievements, detailed achievements in the potential of regime, the third pillar now remains seems elusive and leaves a gap clearly in the framework of the banking union. Beyond this difficult file, there are some other structural gaps that could also be a source of fragility should financial stability be threatened. Another key example I have in mind is the lack of the harmonizing solvency regime for banks in the new. We know that there are variations in domestic insolvency requirements for the new. And it creates situations where the liquidations of similar banks in different jurisdiction is likely to generate dissimilar outcomes. So it can be due obviously to difference in areas such as the grounds for insolvency, the procedures and tools also that are available, but also the sources of external funding that may be available. Many national insolvency regimes which normally have general application to corporate entities are not in any manner specific to banks. And this is creating a misalignment with the provisions of the beyond. So, probably, when dealing with the situation of a bank, like say fail or likely to fail, there is no alignment with the domestic regime for determining insolvency. We have seen this case with the labian bank in the past in the recent past. And there is also the need to close this file. Well, for facing the big peak of the financial crisis, which is yet to be seen. Maybe another area, which is more easily attend, I would say, the EBA is pushing for rapid progress for banks to meet the targets of their minimal requirements for eligible liabilities or the Mrel. Maybe internal Mrel sometimes or also solutions to be found for dealing with small and medium sized banks that have not been able to raise Mrel. Also removing barriers for effective bailing of debt when quoted on EU or third country exchanges, all those are more operational files that probably we can enter into with less political dissenting. So this is another area that we could, well, progress and conclude the plan. Another file is the one on the so-called doom loop or sovereign bank nexus. Well, it is probably well known that the EBA has always been pushing also for progress on this file with a special angle. So today we see that sovereign exposures of European banks were increased during the last two years. Probably we'll see that also for the next year to come, given the public support that has been committed to support loans in banks. But what is important is that the diversification of banks in holding this public debt or sovereign debt more precisely is progressing very slowly but a bit. So, again, it is right the time to push also for having this more, well, sharing of the burden to some extent and facilitate the diversification across our financial system of the handling of the public debt. So these are, so those few masks that I wanted to share with you where I think the confession of the banking union is really needed and it's still possible to do, say, at least in part for this year to come before, in my view, it is the full blowout of the crisis when it hurts the financial system. So as a conclusion, I may say that also Ireland I see has gained from the overhaul of the reform. I have seen also there are many new inflows of institution following Brexit, which in my view show that the regulatory system in Ireland, well, in line with the EU standards is very attractive. And also high capital requirements have been associated with a reduction in the number of banks providing retail services some concern I heard locally. On the other hand, probably some factors like recovery rate on loans, for instance, those practical fight that I mentioned are probably new areas to conquer for our market to be deeper, more fluid and also more single. So, very importantly, my last word will be that the supports which have been provided to the economies throughout the pandemic. I think nobody would dispute them, but I think they should be seen as a window of opportunity to complete the process and avail the full benefits and strength of the banking union as it was envisaged in 2012. It is important not to wait until this crisis finally develops and put the financial system on the cliff edge. I have been strengthening it a lot. I think it helped us navigating this first year, and we still have a chance to navigate well for the sake to next year to come. Thank you very much for your attention.