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The future of Europe’s banking environment

Plenary / Panel
German and English language


Executive Director, European Banking Authority, London Abstract Key Note
A.Pan-European banking at a crossroads:

" Before the crisis, increasing integration of global financial markets. Integration particularly pronounced in the EU (and even more in the euro area capital markets and wholesale banking). Financial integration entails important benefits in terms of efficiency and competition, but its unintended consequences have been underestimated for too long.
" Advantages of cross-border integration (pan-EU and beyond) have been visible and well-documented:
" Diversified revenue mix allowing cross-border banks to even out declines or stagnation in particular markets (including their domestic ones) with revenue growth in other markets  as long as overall risks are not compounded.
" Funding diversification  allowing cross-border banks to widen their funding base via subsidiaries based in countries with financially strong sovereign positions
" Offers stronger risk management and governance expertise, as well as wider market acceptance and funding sustainability to subsidiaries in less mature markets (e.g., CEE), also mitigating potential local political interference
" 2007-09 financial crisis revealed the high degree of interconnectedness and risk transmission across EU banking systems, via:
" Market funding (both across the euro area and from non-euro markets)
" Credit exposures (e.g., commercial real estate loans in foreign markets, either cross-border or via local subsidiaries)
" Cross-border payments and financial transactions
" As the result of the crisis, some retrenchment in financial integration in the EU. According to the ECB (Financial Integration in Europe, 2011), major challenges for those segments that did reach a higher degree of integration before the crisis:
" The crisis has not induced a setback in the degree of cross-border penetration of banks, but...
" Increase of the share of domestic interbank lending (from 46% in 2007 to 55% in 2010)
" Retail market less affected because structurally more fragmented
" The ongoing 2010-11 EU sovereign crisis adds a new and potentially threatening aspect to pan-European interconnectedness and risk transmission, via domestic or cross-border exposures to stressed sovereigns as revealed recently by the EBA stress testing information. Also clear link between sovereign and banking (more generally corporate) risks, particularly on the funding side:
" According to the IMF, stronger correlation between sovereign and private funding costs over the past year in several EU member States (some estimates suggest that, of a 100 basis point increase in sovereign spreads, about 50-60 basis points are passed through the private sector).
" EU banking system is at a crossroads:
" More cross-border integration and growing internationalization, not only in the banking sector, or&
" Steeper retrenchment within national borders
" Notwithstanding the fact that signs of a home-bias are emerging in some segments, so far we see the large banks with cross-border activities continuing on the same path, unless required by regulatory authorities to divest foreign assets and operations as part of restructuring plans
" Post-crisis bank activity growth remains more subdued, owing to:
" Lower volumes of investment banking/trading due to more difficult market conditions and to new more stringent regulations (ex: Basel 2.5, US Dodd-Frank)
" Lower volumes of new lending for both individuals (mortgages, consumer credit) and businesses due to more reduced demand, banks own de-risking via tighter loan-underwriting criteria, and regulatory requirements for enhanced capital and liquidity levels and quality, lower leverage and more appropriate funding (Basel 3 and CRD 4)
" Under these conditions we should expect large EU banks to continue to look beyond their national borders to generate new business and revenues
" Drive to generate acceptable returns on equity positions large EU banks to look to activities in higher-margin higher-growth emerging markets (CEE, Latin America, Asia-Pacific, etc.)
" Ad-hoc opportunities to acquire EU bank franchises becoming available in the market (i) due to divestiture programmes (including those required by EU State Aid provisions) or (ii) as financially weaker institutions as a whole.
" Cross-border activities, both within the EU and beyond, are viewed by the banks as strengthening the earnings mix and contributing to risk diversification  across geographies, lines of business and products
" At the same time they can bring new pockets of risk which, if not managed properly, can have a negative ripple effect on the entire group; retail and commercial banking markets are idyosincratic across borders and success in its home market does not automatically equip an expanding bank with expertise in a new foreign market.
" The challenge for policy makers and regulators is therefore to keep pace with increased integration.

B.Adapting the EU regulatory and supervisory framework to the new environment
" The evidence of high interconnectedness and vulnerability to risk transmission across the European banking landscape calls for a more integrated approach to regulation and supervision within the EU.
" EU bank regulatory measures and initiatives are meant to remain neutral with respect to pan-EU banking integration  favouring neither market segmentation nor forced cross-border consolidation.
" The recent stress-testing exercise for EU banks undertaken by the European Banking Authority pooled resources, input and effort from all national supervisors within the EU. We have learnt very much from each other.
" The exercise also confirmed that there are still significant differences in the way same rules are implemented when discretion is left to national authorities. Approaches are even more diverse when one looks at how those rules are enforced in day-by-day supervision.
" The EBA is working on a single rulebook for EU banks. CRD 4 creates an adequate framework for a coherent and sensible pan-EU approach to banking regulation, but it requires also a big effort in defining many technical aspects that are crucial for guaranteeing a rigorous and consistent implementation. Over the next years, the EBA is called to draft about 150 regulatory and implementing standards. Need to keep momentum and define fully harmonised rules, which do not leave room for arbitrage opportunities.
" On the supervisory side, work on practices, approaches, validation methods. Our commitment is to strengthen the work and cooperation within the Colleges of supervisors which is overseen by the EBA. In addition, strong monitoring of risks arising in EU banks and the sector as a whole is necessary.
" Looking ahead, the regulatory community is called to address the twin challenge of banks being both prudentially sound and increasing lending:
a)Banks equipped with (i) stronger liquidity and capital levels, (ii) conservative funding structures, (iii) sustainable business models, (iv) calibrated risk-return parameters, and (v) adequate risk culture, management and controls...
b)... While at the same time continuing to lend to businesses and individuals, thus financing economic growth and diversification across the EU
" Banking regulation and supervision may certainly play a pivotal role in pursuing these goals, but they are not enough under current macroeconomic and market conditions. It is essential to loosen the linkage between sovereign and banking risks.
" Various  not mutually exclusive  avenues are available. On the sovereign side, Eurobond issuance could help, by (i) presenting more safety and predictability to investors and thus (ii) being of interest to a wider pool of global investors than national sovereign debt issued by countries with stressed economies and financials.
" During the crisis it was decided that rescue operations were a matter for national budgets. This has created the interconnection between banks and their sovereigns. Therefore, the introduction of EU schemes for banks restructuring and resolution may also contribute to partially decouple banks from their national sovereign. The establishment of an EU-wide resolution fund, or a close European System of Resolution Funds, financed ex ante through contributions of cross-border groups, would be a major step forward. It would ensure a substantial contribution of the private sector to crisis resolution and provide an institutional underpinning for coordinated support operation in the limited cases in which this would be warranted.
" This should be implemented in a long term perspective  say 10 years  , in order to allow for enough time to gradually build up the capacity of the fund and to strengthen supervisory convergence and cooperation, which is a necessary condition for sharing responsibilities for crisis resolution at the EU level.
Chairman of the Board of Directors, Swiss Reinsurance Company Ltd, Zurich Abstract Key Note
There are a number of fundamental problems ailing Europe's banking sector. One of the primary issues facing many financial institutions is their exposure to weakened eurozone economies: as concerns grow about potential sovereign defaults, they are confronted with challenges such as higher funding costs or restricted market access. Other issues handicapping European banks include low economic growth rates, the reduced risk appetite of investors, low lending rates, public and private deleveraging, and lingering uncertainty over eurozone stability and regulation.
The banking sector is in the midst of a profound transition driven by regulatory developments, coupled with funding pressures and the redefinition of commercial priorities. These changes are impacting the banks' profitability and business mix, as well as the shape of the industry and its contribution to the European economy. One of the key challenges for banks is the need to comply with stricter capital requirements under Basel III, which are likely to significantly alter their structure  triggering a mix of shrinkage and consolidation. In brief, Europe's banking sector, which supplies three-quarters of the financing required by the real economy, is very fragile and beset with problems at a time when the rapid recovery of banks is crucial to support economic growth.
Against this backdrop, there are three approaches that could be of long-term benefit to Europe's banking industry. First, the business models of European banks should be realigned to maximize diversification across regions and business lines  a move that would contribute to their long-term stability and the stability of the financial system. Second, global regulatory regimes should be developed to ensure a level playing field for institutions in Europe and the rest of the world, thus eliminating uncertainty and problems such as regulatory arbitrage. Third and most importantly, European banks should focus more on client-centric business models since stable client relationships form the foundation of sustained, diversified growth and are key to the banks' long-term survival.
Going forward, one of the fundamental questions for European banking will be: at a time of low share prices, who will supply the risk capital required by the real economy? With banks deleveraging in response to financial losses and higher capital requirements, they are constrained in how much they can lend to finance the growth of the real economy. This is a key issue since the diminished supply of risk capital has the potential to further stifle economic growth. It can thus be concluded that a strong financial sector is vital to accelerate the expansion of Europe's economy and that it is important to create a regulatory and political climate that not only promotes economic stability but also greater economic opportunities, as this will stimulate demand for European banks to put their capital to work  helping drive the job creation that Europe so desperately needs.
Member of the Management Board, Erste Group Bank AG, Vienna Abstract
Auf der Tagesordnung der europäischen Banken befinden sich seit gut 3 Jahren Themen wie Basel III, CRD IV, Bankensteuer, Stress-Tests. Sie dominieren den Alltag und die Geschäftsorientierung vieler Finanzinstitute. Die Gefahr dabei: Die Überregulierung wird notwendigen Innovationen und der Kundenorientierung der Bankenlandschaft einen Dämpfer versetzen.
Chief Risk Officer, Erste Group Bank AG, Vienna Abstract
Wir unterstützen grundsätzlich regulatorische Maßnahmen, die den europäischen Bankensektor krisenresistenter machen. In den kommenden Monaten wird es auf die konkrete Umsetzung dieser neuen Regularien  insbesondere der neuen Eigenkapital- und Liquiditätsvorschriften  ankommen. Diese Implementierung erfolgt nicht  im luftleeren Raum , sondern wird auf europäischer wie auf nationalstaatlicher Ebene von einer Vielzahl politischer und wirtschaftlicher Interessen bestimmt. Wir sind Mitglied einer führenden europäischen Bankengruppe, für die als Universalbank vor allem die Finanzierung der Haushalte und der Wirtschaft in Italien, Österreich, Deutschland sowie in der Region Zentral- und Osteuropa im Vordergrund steht. Auch im Interesse unserer Kunden drängen wir daher auf die Schaffung gleicher Rahmenbedingungen für alle Marktteilnehmer ( level playing field ), die es den europäischen Banken auch in Zukunft erlauben, ihre volkswirtschaftlichen Kernaufgaben in vollem Umfang wahrzunehmen.
Director, International, Financial Services Authority, London Abstract
Deliberations in Basel and the Financial Stability Board point the way toward a sounder and safer banking system in Europe and globally. But the immediate issues are the state of the economy, especially in the US, and the resolution of government debt issues in the eurozone.
Vice-Rector for Financial Affairs and Infrastructure, Vienna University of Economics and Business, Vienna Chair


Executive Director, European Banking Authority, London

 Doctor in Financial Economics and Master of Science
  Leading the regulatory response to the financial crisis by the fully integrated financial regulatory agency
2009-2010 Chairman, HFSA - Hungarian Financial Supervisory Authority, Budapest
  Established a new commercial bank with universal banking licence for the market leading insurance company in Hungary
  Launched a successful assure-banking operation with 150 000 new banking clients in 3 years
2006-2009 Chief Executive Officer and Member of the Board of Directors, Allianz Bank (Allianz Group), Budapest
  Managed all business lines and sales channels of the fourth largest universal bank in a Co-CEO structure
  Two-fold increase in total assets and profits
2002-2005 Chief Executive Officer and Member of the Board of Directors, CIB Bank (Intesa Sanpaolo Group), Budapest
  Responsible for treasury operations, securities trading and sales, and liqudity management
2001-2002 Managing Director, CIB Bank (Intesa Sanpaolo Group), Budapest

lic.oec.HSG Walter B. KIELHOLZ

Chairman of the Board of Directors, Swiss Reinsurance Company Ltd, Zurich

1976 General Reinsurance Corporation, Zürich (mit Einsätzen in den USA, Großbritannien und Italien sowie Verantwortung für das Marketing in Europa)
 Seit 1989 Verschiedene Positionen vom Mitglied der Geschäftsleitung über CEO bis Präsident des Verwaltungsrates, Swiss Reinsurance Company
 Seit 1999 Mitglied, Verwaltungsrat, Credit Suisse Group AG
1986 Abteilung Multinational Services, Credit Suisse (zuständig für Kundenbeziehungen)
2003-2009 Präsident, Credit Suisse Group AG

Mag. Dr. Peter BOSEK

Member of the Management Board, Erste Group Bank AG, Vienna

1993-1996 Assistant Professor, Department of Constitutional and Administrative Law, Faculty of Law, University of Vienna
1996-1998 Advisor to the Board on all Legal Matters, Law-Office, Department of Constitutional and Public Law, University of Vienna
1996-2005 Lecturer, Faculty of Law, University of Vienna; School of Finance; Federal Academy of Public Administration
1998-1998 Strategic Product Management, Real Estate Department
1998-2002 Managing Director, Neue Eisenstädter Gemeinnützige Bau- Wohn- und SiedlungsgesmbH
1999-2001 Head, Product Management and Residential Building
2000-2007 Member, Management Board, Wohnbaubank AG
2001 Member, Supervisory Board, various subsidiaries
2001-2002 Head, Housing & Real Estate
2002-2003 Head, Sales Steering
2004-2007 Head, Business Unit Retail
2007-2014 Member, Management Board, Erste Bank der österreichischen Sparkassen AG, Vienna
since 2015 Member, Management Board and Chief Retail Officer, Erste Group Bank AG, Vienna

Willibald CERNKO

Chief Risk Officer, Erste Group Bank AG, Vienna

1983-1985 Account Executive, Raiffeisenbank, Obdach-Weißenkirchen
1985-1996 Corporate Banking Division, Creditanstalt AG, Vienna
1996-1998 Deputy Head, Corporate Banking Division, Creditanstalt AG, Vienna
1998-2000 Head, Corporate Banking Division, Creditanstalt AG, Vienna
2002-2003 Head, CEE Division, Bank Austria Creditanstalt AG, Vienna
2003-2007 Member, Management Board, Bank Austria Creditanstalt AG, Vienna
2006-2009 Member, Management Board, HVB AG, Munich
2008-2009 Head, Retail Germany and Austria Division with the Group Title of Executive Vice President, UniCredit, Vienna
since 2009 Country Chairman Austria and Member of the Management Committee with Title of Senior Executive Vice President, UniCredit S.p.A., Milan
since 2009 Chairman, Management Board, UniCredit Bank Austria AG, Vienna


Director, International, Financial Services Authority, London

 Ph.D. in Economics, University of Chicago
 Prior to joining the Financial Services Authority in 2004, Mr. Huertas held a number of Senior Positions including:
 Chairman and CEO, Citibank Germany AG
 Country Corporate Officer, Switzerland
 Member, Basel Committee on Banking
 Alternate Chair, EBA - European Banking Authority
 Supervision and Member, Financial Stability Board's Steering Group on Resolution
 Guest Lecturer (Finance), Johann Wolfgang von Goethe University, Frankfurt, Germany

Mag. DDr. Regina PREHOFER

Vice-Rector for Financial Affairs and Infrastructure, Vienna University of Economics and Business, Vienna

1974-1980 Study of economics at the University of Economics and Business Administration in Vienna
1977-1980 Study of law at the University of Vienna
1980 Doctor's degree in both fields of study
1980-1981 Legal practice at court
1981-1987 Deputy Head of Legal Department/ Export Guarantees, Oesterreichische Kontrollbank AG
1987-1999 Creditanstalt-Bankverein (from 1 January 1998 Creditanstalt AG)
1992 Head of Trade and International Project Finance
1993 Assistant General Manager and Deputy Head of Finance Division
1995 Deputy General Manager and Head of Finance and Consulting Division, additionally from
 Following the integrations steps in the Bank Austria Creditanstalt Group from July 1999:
1998 Head of Division, Multinational Corporates and Insurance Sector
1999-2002 Head of Group Division, Multinational Corporates and Products, Bank Austria AG
2000 Head of Multinational Corporates, Corporate and Trade Finance Division, additionally from
2002 Head of Corporate Customers Division
2002 Head of Multinational Corporates, Corporate and Trade Finance Division, Bank Austria Creditanstalt AG
  responsible for Multinational Corporates, Corporate Customers and Real Estate Finance (April 2003 - January 2004)
  additionally responsible for the CEE region (January 2004 - May 2006)
  Corporate Banking and UniCredit Group's Leasing Operations (May 2006 - December 2007)
  Corporate Banking and Sponsor for Global Account/ Cross Border Business Management within the UniCredit Corporate
  Division Executive Management Committee (January 2008 - September 2008)
2003 Member of the Management Board, Bank Austria Creditanstalt AG
 May 2011 Vice-Rector, Infrastructure, Vienna University of Economics and Business
 Oct. 2011 Vice-Rector for Financial Affairs and Infrastructure, Vienna University of Economics and Business
2008-2010 Member of the Managing Board and Chief Executive Austrian Banking, BAWAG P.S.K. (responsible for Retail and Commercial Business)