What are the greatest challenges currently facing the European banking industry? This question was at the heart of a two-day conference hosted jointly by the Bundesbank and the European Banking Institute (EBI) in Frankfurt am Main. It was attended by some 100 participants from academia, the business community and the community of banking and financial supervisors. The topics covered at the conference included the development of the Single Supervisory Mechanism (SSM), the impact of the low-interest-rate environment and proportionality of regulation for less significant institutions. Other issues discussed at the conference were the advent of fintechs and proper crisis management for distressed banks.

At the conference, 13 speakers held talks on these topics and debated them with experts from the banking and supervisory communities. Erich Loeper, Director General for Banking and Financial Supervision at the Bundesbank, said in his remarks that some SSM processes were currently inefficient, and made the case for increased standardisation of these processes. He added that it was necessary to look closely into the question of whether it makes sense, in the long run, for the SSM to remain based at the European Central Bank (ECB).

Stronger division of risks

© Oliver Rüther

In his keynote speech, Klaus Regling, Managing Director of the European Stability Mechanism (ESM), recommended that European integration be continued in those areas in which it makes sense. He said that priority should be given to the advancement of financial market integration and, in particular, capital market integration, as this would contribute to a stronger division of risks by enhancing resilience to asymmetrical shocks. This, he noted, would benefit all member states in the long run.

José Maria Roldan, Vice-President of the European Banking Federation, said that European banks would have to develop sustainable business models going forward. The challenges they faced included the uncertainty and complexity of new regulatory guidelines and the current low-interest-rate environment. He saw change as being necessary in order to use technological progress to cut costs going forward instead of losing market share to fintech companies.

The conference was very well received. Its organisers and attendees stressed the interdisciplinary exchange of ideas and opinions between lawyers, economists, bankers and supervisors, adding that this exchange would remain necessary and productive even after the conference. Regling noted that the Bundesbank and the EBI, through the conference and their work overall, were contributing to bringing Europe’s partners somewhat closer together again.