Recovery Time

In the aftermath of what may be the most important crisis we have witnessed, we are beginning to see glimmers of hope. The European banking industry anticipates recovery but it is not unreasonably optimistic. At a European level measures have been put in place by member states and the European Commission to protect citizens’ savings and then rescue banks in difficult situations. These measures have prevented financial instability but they are aimed at containing the most immediate damage to the economy. Their longer-term consequences have raised concerns.

Many European banking stakeholders fear that governments taking shares in private financial institutions have generated an imbalance in the competitive environment. In that context, some banks may be put at a disadvantage, which would generate further consequences for markets and employment in the banking sector. Our financial system must find a balance between market rules and state support. Policymakers are in the process of doing this and our role as sector representative is to make sure the voice of banks is heard in the process. Our common initiatives at European level are not enough. Reforms need to be pursued in a well-coordinated manner at the international level.

We are now at a crossroads: the G20 has provided the political impetus for global regulatory reform, and international and regional standard setters continue their technical work. As the European Banking Federation, we are fully committed to respecting the principles and standards defined by the international community and in particular by world leaders at the G20. Banks need to operate on a level playing field, where measures are well coordinated at a global level.

The new legislative framework should not create obstacles to the sound operation of banks.

If drastic measures are taken, financial institutions may be hampered from playing their part in funding companies, individuals or public services, and in internal capital markets that allow asset allocation across countries. This would have disastrous consequences.

Banks are mindful of the need to put the sector back on a healthier growth path. But they also know that caution is needed to avoid unwinding the process of financial market integration in the EU that the EBF has been working at for the past 50 years. This process must be part of a coordinated effort to restore a healthy economy and ensure the competitiveness of European banks on the global scene.