Europe’s banking industry must operate in a very challenging environment, so Future Banking asked Robert Priester, deputy chief executive of the European Banking Federation, what the most pressing issues are for the financial services sector. Inevitably, regulation was at the top of the list.
The European Banking Federation (EBF), the voice of the banking industry when it comes to making its case to the lawmakers in Brussels, currently faces several challenges, but there is one in particular that stands out for deputy chief executive Robert Priester.
"The biggest challenge we face as the EBF, together with the national banking associations that are our members, is to try to understand what the raft of new regulation actually means and what it represents in terms of a framework in which banks can operate," he says. "There is a long list of new rules, but many of the measures aim to bring back financial stability in European financial services.
"We've seen some of the rules coming out of international forums like Basel and G20 focus on higher capital levels and the quality of capital that is kept in case of difficulties. We are also seeing new rules on the liquidity of banks. Then you have the necessity to address banks that are failing, and then bank recovery, and if you are not able to recover a bank then you need to resolve it in a way that doesn't disrupt the whole market or create financial instability."
Within this big picture, there are elements that impact on operational issues. The Markets in Financial Instruments Directive (MiFID), for instance, defines not only the framework in which banks operate, but also the range of products and advice that can be offered to retail clients.
"We are trying to understand what it means for the capacity of banks to keep serving their customers and the economy at large to support whatever growth we are starting to see," says Priester. "We are here to support this process. We ask policymakers to be conscious of the implications of their choices and to see the bigger picture, not just one particular rule. We also have an internal challenge to get banks and their national associations to agree on what the rules should be and on how we can offer alternatives."
One area where Priester sees the new regulations having a major impact is IT.
"We must know what a bank can and cannot do in the new framework," he says. "There will be a big challenge for banks to adapt their IT systems, particularly in the area of regulatory reporting. That is going to change dramatically, and we have been pushing for a common framework throughout Europe - that all banks report the same information and that it be more comparable, which is important as more banks work cross-border now."
"Banks have to get their heads around what is expected, how they can deliver it, and when and how information can be found in their systems. Then you have the question of how banks can make IT systems work for their customer bases, how they can offer new products and services, and how they can adapt quicker."
The EBF does not involve itself in the efforts of individual banks to become more customer-centric, but it works to shape the context in which these efforts take place.
"There is a varied response to the financial crisis, but you see banks returning to their roots and putting the client at the centre of their attentions," says Priester. "The EBF tries to ensure that the rules that are being put in place in Europe don't overlook this issue. There is a lot of noise over the fact that SMEs were not at fault in the crisis, but the new capital requirements would have a disproportionate effect on how banks could be lending to them. We lobbied for a slightly privileged regime for the funding of SMEs, which was followed, and everybody involved in policymaking realises that the vast majority of enterprise in Europe - and the bulk of employment - is in that sector. We are trying to find ways to neutralise some of the more punitive aspects of the new capital rules on customer segments like the SME market."