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| The Alte Oper as venue of the European Banking Congress There were more policemen than protesters at the location (Source: Thomas Seidel) |
For a whole week, bankers from all over
Europe have been meeting and exchanging views on various topics in
the financial sector. The motto was: "Back to normality".
Last Friday, the closing event took place at the Alte Oper in
Frankfurt. A very small group of protesters in front of the meeting
place made the lack of excitement about finance business clear.
Inside, there was also a lack of ideas.
Europe, according to Christian Sewing
of Deutsche Bank in his opening speech, is playing with its future.
The European Union, unlike the United States with its large domestic
market, is still too fragmented. There are about 27 markets with e.g.
different consumer protection rules. Sewing claimed to have an
European agenda again. Alternatives to American and Chinese
technology platforms must be developed. At the same time, one must
remain attractive for young people, both in terms of wages and
opportunities for entrepreneurship. All this, however, presupposes a
larger single European market.
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| Christian Sewing CEO Deutsche Bank (Source: Thomas Seidel) |
Risk Management and Digitalization
In a panel discussion, Sewing focuses
on the banks' actual core competence, their ability to manage risk.
The banks should also make this ability available to their customers.
The banking industry in Europe continues to be the catalyst for
economic growth by financing it. Sewing is thus alluding to the
dominance of banks in industrial finance in Europe. Sewing demands a
new mentality in the financial business, but does not say in which
direction the current mentality should change.
Commerzbank CEO Martin Zielke's
permanent statement is digitalization. He considers that the banking
sector is over-regulated on the one hand, but under-digitalised on
the other hand. Today, bankers would have to become technologists.
For example, cloud technology in Europe is lagging far behind
availability in the USA. In a hazy remark Zielke mentioned people at
Commerzbank having a number of good ideas internally. That sounds
exciting at first. However, as long as one don't get ideas out there
and try to do business with them, such ideas won't remain profitable.
Lack of profitability is known to be one of the main problems of the
self-proclaimed Mittelstandsbank. According to Zielke, it is not to
be expected that the ECB (European Central Bank) will return to a
monetary policy like before the financial crisis. This can only mean,
that there should again be interest margins with which banks can earn
money comfortably without having to be truly innovative.
Mario Draghi's last appearance as
President of the European Central Bank at this annual event was
insubstantial. He could have saved himself that. The European Central
Bank's-metronome had nothing new to say. The economic statements on
the overall situation of the economy are well known. The ECB's
position and conditions are unlikely to change.
Core competence of the banks
On the other hand, the remarks of Jean
Lemierre, the chairman of the supervisory board of the French Banque
Nationale de Paris (BNP), who looks only outwardly old-fashioned,
seem surprisingly refreshing. He advises for example, to stop
dreaming about Anglo-Saxon pension funds in Europe. Europe has a life
insurance system. Nevertheless, the banking and capital market union
must move closer together. Contrary to Zielke's views, banks are not
technology companies. He, like Sewing, sees risk management as
the core competence of banks and for that is no need for any special
technology. Rather banks should listen to their customers' wishes
and meet their needs.
Much has already been achieved since
the financial crisis, but Lemierre believes that only half the way
has been covered so far. It is clear that new structures have to be
created.
Of course, it is still unclear how the
markets will realign themselves because of Brexit. An important
problem that has not yet been solved, is the ongoing fragmentation of
liquidity. The monetary policy of the central bank is made for the
productive industry and not for the banks. It is already clear that
banks will lose a sense of risk because of the large amount of
liquidity.
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| Mario Draghi President of the European Central Bank (Source: Thomas Seidel) |
Technology for the future
A second panel discussion focused on
technology in the financial sector. The audience was asked for
example, what concrete benefits crypto-currencies would have to them.
As it turns out, none benefit is expected to be available for the
time being. This is precisely the reason why crypto-currencies are
not developing on a broad scale. There is no added value for
consumers and companies when using them. It becomes clear what the
financial sector really needs are standardized processes, that make
business processing effective and affordable. What just few people
know, is that standards for bank procesing have existed since the
1970s, but in almost 50 years the financial industry has not managed
to take advantage of these opportunities. To dream today that in the
future processes, such as the very cost-intensive processing of
securities- transactions, could be simplified very soon with
blockchain technology is not helpful for the industry.
The five-day Euro Finance Week is a
mammoth event for the financial sector, which of course has to
consider a new content concept. Its declining importance can be seen
in the decreasing number of sponsors. At least the most prominent
representatives of the industry, who traditionally speak on the last
day, have not really had anything new to say in recent years. This
reflects the general political paralysis in Europe. Germany has had a
torturous year of government, the end of which is not yet in sight.
The Brexit is imminent and one has no idea how it will end. 2019 will
be a year for many changes in leadership in Europe. In the meantime
one cannot see anymore one or the other faces of the official
decision-makers. Either there will be a storm blowing a fresh wind
through Europe, or the old continent will choke on its muff from
rotting compromises.
