German banks need a digital agenda, Bundesbank Executive Board member Andreas Dombret proclaimed. "All German banks must work towards ensuring that Germany's banking sector does not remain a blank spot on the digital world map", he said to the just under 700 representatives from banking supervision and the banking industry who attended the Bundesbank's 19th banking symposium in Frankfurt am Main.

Think digitally

The digital banking business has long been far more than just online banking. Today, the digital banking business includes innovative concepts, such as video consultation services, digital credit brokerage and the incorporation of social media into banking, Mr Dombret said. Digitalisation has gained considerable momentum, which all banks have to be prepared to embrace, Mr Dombret stated, adding that "sitting it out is not an option". There is no end to this development on the horizon. He asked banks to think more from the customer's perspective and to adapt to new wishes and requirements, also by means of flexible IT structures. "If you don't think digitally, you're going to find it difficult to compete for digital customers", he warned.

Long gone are the days when competitors in the digital banking business were just other banks. In addition to financial technology companies, known as FinTechs, other industries with a strong IT focus are only one step away from the banking world, said Mr Dombret. We are already seeing established online enterprises starting to offer banking services. So far, they have been operating in a largely unregulated playing field, but in the future, banking supervisors will be closely monitoring these enterprises, too.

FinTechs would welcome this decision, Raffael Johnen emphasised, who participated in the conference representing FinTech company auxmoney. Being subject to greater regulation and supervision in the future would reinforce the credibility of FinTechs. Mr Johnen added that this would also allow us to identify black sheep, which would benefit the market as a whole.

Internationally operating cyber gangs

Bundesbank Executive Board member Andreas Dombret asked that all providers of digital banking services significantly step up their IT security on the whole, adding that growing digitalisation has also led to a significant increase in cyber risks, as the number of goods that need protecting has gone up. "In addition to financial assets, personal data and hence access to services are now saved in cyberspace", said Mr Dombret. In recent times, there has been an increase in the incidence of cyber theft and attacks on banks' IT systems, warned also Felix Hufeld, President of the German Federal Financial Supervisory Authority (BaFin), in his speech at the symposium. Internationally operating cyber gangs are targeting the financial sector in the hope of making a quick buck.

Supervisors will be monitoring IT security in the future

Supervisors are also learning from these developments. The European Banking Authority (EBA), for instance, has set up a task force on IT risks, which is tasked with establishing new requirements for the IT infrastructure of banks in Europe, thereby paving the way for a uniform IT supervision, Mr Hufeld explained. The Bundesbank and BaFin will also be on hand to share their expertise in performing IT audits with the EBA and the ECB in the context of its supervisory tasks. Mr Hufeld said that on-site inspections of IT security would also be a conceivable option in future.

Current supervisory and regulatory approaches

A further key topic at the conference was the current developments in the area of banking supervision at both the international and European level. Joanne Kellermann, member of the single resolution regime, talked about the progress that has been made to date in establishing the Single Resolution Mechanism (SRM). From 2016, the SRM will be responsible for the recovery and resolution of insolvent banks, which are subject to supervision by the ECB, and will mark an important milestone in the completion of the European banking union. Erich Loeper and Christian Denk from the Deutsche Bundesbank gave an overview of the current status of the regulation being developed by the Basel Committee and the EBA. Representatives of the German banking industry clearly demonstrated their approach to dealing with the stricter requirements they have to meet under European rules and regulations.