Q&A: A single supervisor for the euro area- 5 years later, 05 December 2018
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Coen, William
Enria, Andrea
Véron, Nicolas
Panel discussion on "A single supervisor for the euro area- 5 years later" at ECB colloquium “Promoting safe and sound banks in the SSM” in honour of Danièle...
 One of you want to comment. I was supposed to open it because we are very democratic to the public. I don't know if there are questions. I will ask you to be concise and to introduce yourself. Frank. Well, thank you very much for giving me the floor, Sylvie. First of all, I would like to then also compliment the Banque de France for their wonderful leadership in thinking of what we now call the central bank and supervisors network for the greening of the financial system. And indeed, we will be celebrating the first birthday of that network in a couple of days' time. And we started out with eight central banks, among which the Bank of England, the Bundesbank, the Bank de France, the Dutch Bank, but for example also the People's Bank of China and the Banco de México. But now we have now 21 members in a little over a year, or less than a year time, as I said. And it might be that even in the next couple of days, three more members will join. As observers, there is the BIS, there is the World Bank, there is the European Bank for Development Reconstruction. So indeed, I think there is a very amazing wave of central banks and supervisors that do understand that this is not something just about dreaming or just about being concerned about a very important public good, as I think Bill said very aptly. But it is about our task. It is about risk. It is plainly within our mandate. And it takes a while to understand that. But in Bali, we published the first interim report in which it actually said something that might sound like an open door, but is a clear invitation to start thinking about that in those institutions that have not yet done so. And that is that climate risk is a key driver of financial risk. And once we understand that, it should be on all our risk maps, and it should be in the very core of what we do as supervisors. So thank you for giving me the floor to say that. And now that I have the floor, it was just six months, Daniel, but I remember that we were together at the Dutch ballet. And after that, I realized that it was a great privilege, at least, to be able to share these six months with you. So thank you for that. Nicola, you wanted to add something? Just to emphasize something that Andrea said before, it's important that the SSM is not overwhelmed by its day-to-day work, and it's able to look at future challenges. I think it's also important to do the day-to-day work and finish the job on things that have been started and the job is not finished. But I think if you look at the broader picture of banking union, including allowing the SSM to have the authority to address future challenges such as sustainable finance and fintech in an appropriate way, the banking union to be finished doesn't only need effort by the SSM, by Andrea, by Sabine, and by all the people who are still in this shop. The legislative framework is not finished. And I think that now that we're entering the cycle for the European Parliament election, a new commission going forward, this emphasis on finishing the legislative work, of breaking the banks of an vicious circle, setting the right incentives for the SSM to be able to do its job with authority to be able to pull the trigger when it needs to for crisis to be managed in an efficient way when it has to be. I think there's a huge remaining agenda. I would argue the most difficult part has been done. But when you look at what remains to be done, that's massive, tackling sovereign exposures, making sure there is no ring fencing, creating a European deposit insurance, as Danielle reminded us, creating a crisis management framework where you are sure that decisions will be made on time. I know bank of popular went kind of well, but that's not enough to be complacent. So I just want to remind ourselves that this is a day of celebration. There is every reason to be proud of what has been achieved. But as somebody who spends a lot of time looking at the banking union, I'm concerned about its reversibility. I'm concerned about the fact that there are crisis scenarios in which what has been achieved not only would not be enough, but could be put into question, could be rolled back. And this has happened in the past. So if we don't want banking union to be rolled back, it has to go further towards its stated objective. And for that, the job of the SSM is not enough. So legislators have to act. You want to comment on that? The floor. Silly, let me just emphasize something I said earlier. The importance of supervision from the Basel Committee's perspective, so much of what we do. Basel III, capital liquidity standards, this gets a lot of attention from the press. Obviously from the banks, for good reason. It has an impact on the bottom line. But arguably, what's more important, things like supervision, focus on governance, on culture, stress testing, things that really are not per se regulatory or policy matters. And so picking up on your point, looking ahead, I really do see the SSM playing a more prominent role internationally, certainly at the Basel Committee level. Because it's not, we can talk about the sensitive membership issue. But one of my responsibilities as a secretary general is to manage efficiently the resources of the Basel Committee. Our resources come from the 45 organizations that comprise the Basel Committee. And without a lot of those resources, we would be shorthanded. So going forward, it's not so much about negotiation. It's not so much about building consensus on policy matters. It really is now. The focus will be on supervision. Andrea, do you want to react on that? Yeah, well, what I would say, I mean, this is a panel on the last five years. So let me try to focus a bit on that. I mean, if you go back to 2012, when the Banking Union was taken, the decision to establish the Banking Union was taken. A lot of emphasis was put on cutting the link between banks and their sovereigns. I mean, you look all the speeches, all the rhetoric setting up of the Banking Union, that was the main focus. Now, we have to be honest. And five years after that, the link between the banks and their sovereigns is still there, very strong. Is this a fault of the SSM? Has the SSM not done something that would have cut that link? I don't think this is the case. I think the SSM has done everything in its powers to really cut that link, which was reducing the risks in the banking sector to make sure that you didn't have a banking sector in one country basically wrecking the public finances in that country. So that was the task of the SSM, mission accomplished. The point is that the other link is still there very much. And as Nicholas was saying, that link needs probably, as also Danielle was saying in her remarks this morning, these cutting that link requires, let's say, institutional design bold efforts and brave actions on the side of policymakers at the European level. And it's a bit sad that we're not there yet. And maybe just the rules in trying in the treaties which are to reduce the debt. Because all member states are committed to respect some common agreed principles that might also help. So there cannot be a good banking supervision if the macroeconomic environment is not sound and safe. Another question, maybe I? So yes, Kras? It seems to me that the European banking sector over the last five years has more or less restored safety. But it has not yet restored soundness, where I take soundness to not only encompass safety, but also encompass profitability. And one of the reasons is, of course, that Europe today is still as overbanked as it was five years ago. How do you see the role of the SSM in that issue? I suggest that we take another question and we answer together. Please stand up. It will be easier to see you. Thank you. Good morning. Does it work? Yes. I'm Jose Maria Roldan, Chairman of the Spanish Banking Federation and Vice President of the Riga Banking Federation. So a pleasure to be here, Daniel, as you know very well. Let me go back to the future. Andrea was mentioning fintechs. The reality is that regulation and supervision today is based on the type of entity you are. If you are a bank, you're regulated and supervising one way. If you are an insurance company, another different regulation and supervision. But technology is eliminating the boundaries between the different type of financial institutions and between financial institutions and non-financial institutions. My question is very clear. To Bill, to Andrea, is regulation and supervision prepared to break that tradition and really regulate firms looking at what their activities are rather than looking at what their societies or mercantile form is? Thank you. OK, so two questions. One on profitability, over banking, and the second on the boundaries. And for me, to be honest, Andrea, I don't think that there is a difference between the daily life and the forward looking issues, because we are already in a world where it is colluding. So I don't know who wants to answer first. Yeah? Sorry, I think on PAS's point, this is a point we'll take. And we hear a lot about European banks not having cut expenses, not have become more efficient as North American banks, perhaps Asian banks. But this point is something that the SSM has worked on, I know. It's not just about becoming more efficient. What about strategy? So that's something, it is important to maximize profitability, but it's not just by reducing regulatory burden. It's not just about reducing your operating costs. What's the bank's strategy? How do you plan to make money over the course of the next several years? And I think that's something that we hear about in Basel. What is some of the big banks in Europe? What's your strategy? And I think that's something that the SSM has rightfully focused on. And Jose Maria's question, this comes up all the time. We hear from the banks, move away from this whole concept of regulating entities and regulate activities. No one has told me how you do that, though. I mean, without expanding the regulatory perimeter in a massive way. So it sounds good to regulate activities. I don't know how you do it, though. I think there is a, I draw the distinction, Jose Maria, between regulation and supervision. Not everything can be handled through a regulatory response. What's the supervisory perspective on fintech? And asking banks, asking banks from a strategic perspective, how are you positioning your bank over the course of the next several years to compete with non-bank players? So yeah, it's not as your point's well taken. It's something we do think about. I could tell you there's nothing underway in Basel to think about regulating fintech. But it's something that we watch carefully. And I think right now it's more of a supervisory perspective when it comes to fintech in banks. Andrea? Well, the question of class would require a little bit of time to answer. But let's say I'm strongly convinced that there is an important, we should first of all understand what we did wrong in terms of getting to the current setting. And there is interesting research which has been done by Daniel Gross, comparing the banking union in the US and in the EU. And the banking union in the US, by the way, is rather recent. It was introduced in 1994 with the Regal Neal Act. So the way in which it worked is that you had shocks, sometimes local shocks, in Puerto Rico, for instance, or in Nevada. And then you had the FDIC intervene with the purchase and assumption approach. So took over the assets and liabilities of the banks and sold them to the best bidder, which in many cases were bankers from other states in the US. This meant that you had a lot of exit from the market, more than 500 banks exited the market. And this led to a restructuring and an absorption of excess capacity in the US. In the EU, we deployed sometimes European taxpayer's money via the EFSF or the ESM. But the restructuring process was mainly dealt nationally. So you had some restructuring and some consolidation at the national level. But as Daniel said, you didn't have a lot of cross-border mergers. You didn't have a lot of more pop-up of this excess capacity. And the inheritance of this is the low profitability that we have right now. So I think that the SSM is doing and should continue doing, putting a lot of pressure on banks to achieve efficiency, cutting costs, becoming a recovered profitability. But there is a structural issue that we should, in my view, address. On the point on Jose Maria, I'm a bit in the same space as Bill. I mean, of course, you would like to regulate activities. The point is that it is firms that fail, not activities. So from a prudential perspective, you are forced to some extent to focus your attention on the institutions rather than on the specific activity. The construction we have is one in which banks are the only institutions which are allowed to combine deposit collection and lending and another number of additional activities, which means that they can create liquidity. They provide liquidity to the economy. So they are subject to a, let's say, harsher regulatory requirement. But there is something true, however, in what you say, and I don't have an answer to that, is that now you have other players which are able to unpick different activities of the banks and reassemble them in production chains, which are outside the regulatory focus. And how to deal with that, I must say, today I don't have an answer, to be honest. Thank you. Before I give the floor, do you want to do one word? Just on the, so I think both, OK, these questions are complicated. But one common thread between both questions is the ability of the SSM to do what it has to do. And one aspect of this question is the ability of the financial firms to arbitrage the authority of the SSM and through fintech, non-banks, and also, I would argue, establishment of banks that are under significant institution threshold arbitrage the SSM framework. I think it's a fact that we have to recognize that the SSM has established its credibility as a supervisor, as was said before, as a supervisor of significant institutions. I think in the LSI, less significant institution space, there's a lot to do still to establish credibility. I'm not saying that the system is failing. I wouldn't go to that far. But I think the transparency is not there on what's happening in that segment of the banking system. And there are some concerning indications of arbitrage that financial firms try to stay under the threshold to have more favorable supervision, at least in some member states. And if that's the case, that create weaklings that should be of concern. One additional concern, of course, which becomes very massive and not anecdotal at all in the context of Brexit, is non-bank investment firms, which establish themselves in the euro area, but escape the supervision of the SSM. So I think the investment firm regulation, of course, is important here. I'm not so optimistic that it will be adopted in a way that tackles this issue convincingly. But I think before talking about FinTech and I'm not underestimating FinTech, it's very important to create a framework that deters and addresses this kind of arbitrage. Here's a comparison with the US is actually enlightening, because there is arbitrage in the US. The US framework should not be idealized. It's often ignored, mistakenly, that the SSM regulation has taken off the table possibilities of the arbitrage that will exist forever in the US by playing between state and national license in the US. In the euro zone, there are only the equivalent of US national licenses, because all the licensing is done by the SSM, even with the concerns I have about LSIs. So this should be taken one step further. And I think here the intent of the investment firm regulation is important, but the outcome is still in doubt. So it's very important that financial conglomerates with the appropriate special provision for insurance should be within the treaty, should be supervised properly by the SSM. And Brexit makes that a big, big challenge, because we see so much of that kind of activity potentially coming to the euro area. And sometimes banks moving from inside the EU, but outside the euro zone to the euro zone, in order to be supervised, this is one of your success. You have attracted. Thanks. Andreas, you wanted to. Thank you. Danielle was kind enough to invite me, so at least I have to contribute a question. And my question is the following. Now, since the financial crisis regulation, it's not the fault of Bill Cohen, has become very complex. And that's rightly so for the large, very large, systemically important banks. May not be the right thing for the medium and smaller banks. A little bit going contrary to what Nicola was saying. And the real question is, because it is so complex that some are overburdened, and the question would be, what is the right approach for smaller and medium-sized banks? Please bear in mind when you answer that Danielle herself said we need diversity also in terms of size of banks. Thank you. Thank you. I suggest as we are moving to the end, but the previous panel was a little bit later. So we are moving to the end of my slot. I think it's a nice question to conclude, and I suggest I will give the floor to all of you. And so the question, if you have a strong message, it's the moment. Bill. I could be brief. Is it a strong message? It's an easy answer, Andreas, from my perspective. The Bilesville Committee produces rules for large, internationally active banks, full stop. How those rules are applied, whether they're applied proportionally in a jurisdiction, that's not my concern. The US, of course, has its proposals out on tailoring. Most organizations, most jurisdictions around the world, provide some kind of proportionate application of the rules. I do note, though, and I see several in this room, people come to Basel, and they say, the rules you guys are making, it doesn't make sense for cooperative banks in Europe or savings banks. And I say, well, that's not my, perhaps I agree with you, but you ought to talk to the leadership in Europe, because it really is, it's not a Bilesville Committee decision. Well, maybe Sven will answer in the next panel. Nicolas. It's a challenge. It's a difficult challenge. I think it will take us time to settle, because in the Euro area, we have two offsetting tasks. We want to make sure that there is a level playing field, and that, to a certain extent, exists in the US, because it's a federal framework for all the reasons we know. So I think there has to be a dedicated effort to make sure that there is at least a minimum level of supervisory quality across the board, including for LSIs. And this is where I see unfinished business for the SSM so far. And at the same time, you're right. I mean, we have a principle of proportionality and subsidiarity, and it should be a driver of having some lighter burden for smaller banks, to a certain extent, maybe in things like reporting and so on. But we also have made a choice, historically, as Bill reminded us in Europe, to have similar legislation for all banks, no matter their size. That's a matter of the European legislators. Personally, I think that it's inevitable that we go through a phase of slightly burdensome, very annoying harmonization of the minimum supervisory quality for all banks, including small ones. And the SSM has to take leadership on this, and it's going to be resisted by all kinds of interests, particularly in member states, which have a lot of those small banks. But I think this is necessary because otherwise it's a problem for the credibility of the system. And once this minimum level has been established, then there will be a case for loosening the framework in a controlled way for the smaller banks. But I don't think we can avoid that phase. So there has been a very thoughtful paper that I encourage everybody to read by Fernando Restoy on what he calls the middle class of banks, medium-sized banks, which have to issue MRAIL and that disruptive for them. I think it sets the challenges appropriately. So I will conclude on that. Thank you. Andre, are you looking for what a boring, annoying, heavy work? More or less, it's what he's proposing for you. Well, I never shy away from boring work when it is important in terms of the achievement. So no problem with that. In terms of the question of proportionality, I think we need to be very careful in distinguishing two concepts of proportionality. One is the very legitimate, I think, request from small banks, specialized institutions, and the like that think that the compliance burden on them is not commensurate with the type of business model they have. And that is true. I mean, we have developed an incredibly complex regulatory system and applying it to a small cooperative with very few, let's say, staff. I mean, sometimes it's daunting task. So if we can do something to lower the burden on smaller banks, I think we should do it. And I think that there are also new options, which are provided also by new technology. I mean, some people are talking about the reg tech all the time. I mean, for instance, on reporting, we couldn't, should probably, develop a system in which a small bank is able to select of the thousands and thousands reporting sales that they are supposed to feel, which ones are relevant for them and to have something that helps them in doing this job. The other point is, instead, proportionality intended as lighter requirements, so less stringent requirements for smaller banks. And here, I think we must be much more careful, especially. It depends. I mean, there are some areas in which maybe MRAIL is one, governance is another one in which you need to tailor a little bit the requirement. But in key prudential requirements, capital, liquidity, and the like, I would be very reluctant to have differential treatment. I've seen that other jurisdictions are going that direction. I saw, for instance, in the US a few weeks ago that they are applying a lower requirement, for instance, on the NSFR to smaller banks, where smaller banks are banks up to $200 billion in assets, so not that small, I would say. And Billy's right. These are not banks which are under the remit of the Basel Committee. But in my view, having a two-tier approach in terms of stringency of the requirements, I mean, this can create, let's say, as also Nicola was hinting, let's say, this incentive for banks to grow in an attempt to remain at lower levels of asset size and the like to escape more stringent requirements. And that could be, in my view, also, eventually, as we have seen very much in Europe, I mean, these banks tend to go down the drain in a hurt sometimes. And they can create systemic problems as well. So in terms of stringency of the requirements, I would be a little bit less willing to go all the way. OK, thank you, all of you. We are going to move to the next panel. And once again, we all be treated to Daniel.
 One of you want to comment.  I was supposed to open it because we are very democratic  to the public.  I don't know if there are questions.  I will ask you to be concise and to introduce yourself.  Frank.  Well, thank you very much for giving me the floor, Sylvie.  First of all, I would like to then also compliment  the Banque de France for their wonderful leadership  in thinking of what we now call the central bank and  supervisors network for the greening of the financial  system.  And indeed, we will be celebrating the first birthday  of that network in a couple of days' time.  And we started out with eight central banks, among which  the Bank of England, the Bundesbank, the Bank de France,  the Dutch Bank, but for example also the People's  Bank of China and the Banco de México.  But now we have now 21 members in a little over a year, or  less than a year time, as I said.  And it might be that even in the next couple of days, three  more members will join.  As observers, there is the BIS, there is the World Bank,  there is the European Bank for Development Reconstruction.  So indeed, I think there is a very amazing wave of central  banks and supervisors that do understand that this is not  something just about dreaming or just about being  concerned about a very important public good, as I  think Bill said very aptly.  But it is about our task.  It is about risk.  It is plainly within our mandate.  And it takes a while to understand that.  But in Bali, we published the first interim report in which  it actually said something that might sound like an open  door, but is a clear invitation to start thinking about that in  those institutions that have not yet done so.  And that is that climate risk is a key driver of financial  risk.  And once we understand that, it should be on all our risk  maps, and it should be in the very core of what we do as  supervisors.  So thank you for giving me the floor to say that.  And now that I have the floor, it was just six months,  Daniel, but I remember that we were together at the Dutch  ballet.  And after that, I realized that it was a great privilege, at  least, to be able to share these six months with you.  So thank you for that.  Nicola, you wanted to add something?  Just to emphasize something that Andrea said before, it's  important that the SSM is not overwhelmed by its day-to-day  work, and it's able to look at future challenges.  I think it's also important to do the day-to-day work and  finish the job on things that have been started and the job  is not finished.  But I think if you look at the broader picture of banking  union, including allowing the SSM to have the authority to  address future challenges such as sustainable finance and  fintech in an appropriate way, the banking union to be  finished doesn't only need effort by the SSM, by Andrea, by  Sabine, and by all the people who are still in this shop.  The legislative framework is not finished.  And I think that now that we're entering the cycle for the  European Parliament election, a new commission going  forward, this emphasis on finishing the legislative  work, of breaking the banks of an vicious circle, setting the  right incentives for the SSM to be able to do its job with  authority to be able to pull the trigger when it needs to  for crisis to be managed in an efficient way when it has to be.  I think there's a huge remaining agenda.  I would argue the most difficult part has been done.  But when you look at what remains to be done, that's  massive, tackling sovereign exposures, making sure there  is no ring fencing, creating a European deposit insurance, as  Danielle reminded us, creating a crisis management  framework where you are sure that decisions will be made on  time.  I know bank of popular went kind of well, but that's not  enough to be complacent.  So I just want to remind ourselves that this is a day of  celebration.  There is every reason to be proud of what has been achieved.  But as somebody who spends a lot of time looking at the  banking union, I'm concerned about its reversibility.  I'm concerned about the fact that there are crisis  scenarios in which what has been achieved not only would not  be enough, but could be put into question, could be rolled  back. And this has happened in the past.  So if we don't want banking union to be rolled back, it has  to go further towards its stated objective.  And for that, the job of the SSM is not enough.  So legislators have to act.  You want to comment on that?  The floor.  Silly, let me just emphasize something I said earlier.  The importance of supervision from the Basel  Committee's perspective, so much of what we do.  Basel III, capital liquidity standards, this gets a lot of  attention from the press.  Obviously from the banks, for good reason.  It has an impact on the bottom line.  But arguably, what's more important, things like  supervision, focus on governance, on culture,  stress testing, things that really are not per se  regulatory or policy matters.  And so picking up on your point, looking ahead, I really do  see the SSM playing a more prominent role internationally,  certainly at the Basel Committee level.  Because it's not, we can talk about the sensitive  membership issue.  But one of my responsibilities as a secretary general is to  manage efficiently the resources of the  Basel Committee.  Our resources come from the 45 organizations that comprise  the Basel Committee.  And without a lot of those resources, we would be  shorthanded.  So going forward, it's not so much about negotiation.  It's not so much about building consensus on policy  matters.  It really is now.  The focus will be on supervision.  Andrea, do you want to react on that?  Yeah, well, what I would say, I mean, this is a panel on the  last five years.  So let me try to focus a bit on that.  I mean, if you go back to 2012, when the Banking Union was  taken, the decision to establish the Banking Union was  taken.  A lot of emphasis was put on cutting the link between banks  and their sovereigns.  I mean, you look all the speeches, all the rhetoric  setting up of the Banking Union, that was the main focus.  Now, we have to be honest.  And five years after that, the link between the banks and  their sovereigns is still there, very strong.  Is this a fault of the SSM?  Has the SSM not done something that would have cut that link?  I don't think this is the case.  I think the SSM has done everything in its powers to  really cut that link, which was reducing the risks in the  banking sector to make sure that you didn't have a banking  sector in one country basically wrecking the public  finances in that country.  So that was the task of the SSM, mission accomplished.  The point is that the other link is still there very much.  And as Nicholas was saying, that link needs probably, as  also Danielle was saying in her remarks this morning, these  cutting that link requires, let's say, institutional  design bold efforts and brave actions on the side of  policymakers at the European level.  And it's a bit sad that we're not there yet.  And maybe just the rules in trying in the treaties which  are to reduce the debt.  Because all member states are committed to respect some  common agreed principles that might also help.  So there cannot be a good banking supervision if the  macroeconomic environment is not sound and safe.  Another question, maybe I?  So yes, Kras?  It seems to me that the European banking sector over the  last five years has more or less restored safety.  But it has not yet restored soundness, where I take  soundness to not only encompass safety, but also  encompass profitability.  And one of the reasons is, of course, that Europe today is  still as overbanked as it was five years ago.  How do you see the role of the SSM in that issue?  I suggest that we take another question and we answer  together.  Please stand up.  It will be easier to see you.  Thank you.  Good morning.  Does it work?  Yes.  I'm Jose Maria Roldan, Chairman of the Spanish Banking  Federation and Vice President of the Riga Banking  Federation.  So a pleasure to be here, Daniel, as you know very well.  Let me go back to the future.  Andrea was mentioning fintechs.  The reality is that regulation and supervision today is  based on the type of entity you are.  If you are a bank, you're regulated and supervising  one way.  If you are an insurance company, another different  regulation and supervision.  But technology is eliminating the boundaries between the  different type of financial institutions and between  financial institutions and non-financial institutions.  My question is very clear.  To Bill, to Andrea, is regulation and supervision  prepared to break that tradition and really regulate firms  looking at what their activities are rather than  looking at what their societies or mercantile form is?  Thank you.  OK, so two questions.  One on profitability, over banking, and the second on  the boundaries.  And for me, to be honest, Andrea, I don't think that there  is a difference between the daily life and the forward  looking issues, because we are already in a world where it is  colluding.  So I don't know who wants to answer first.  Yeah?  Sorry, I think on PAS's point, this is a point we'll take.  And we hear a lot about European banks not having cut  expenses, not have become more efficient as North American  banks, perhaps Asian banks.  But this point is something that the SSM has worked on, I  know.  It's not just about becoming more efficient.  What about strategy?  So that's something, it is important to maximize  profitability, but it's not just by reducing regulatory  burden.  It's not just about reducing your operating costs.  What's the bank's strategy?  How do you plan to make money over the course of the next  several years?  And I think that's something that we hear about in Basel.  What is some of the big banks in Europe?  What's your strategy?  And I think that's something that the SSM has  rightfully focused on.  And Jose Maria's question, this comes up all the time.  We hear from the banks, move away from this whole concept  of regulating entities and regulate activities.  No one has told me how you do that, though.  I mean, without expanding the regulatory perimeter in a  massive way.  So it sounds good to regulate activities.  I don't know how you do it, though.  I think there is a, I draw the distinction, Jose Maria,  between regulation and supervision.  Not everything can be handled through a regulatory  response.  What's the supervisory perspective on fintech?  And asking banks, asking banks from a strategic  perspective, how are you positioning your bank over  the course of the next several years to compete with  non-bank players?  So yeah, it's not as your point's well taken.  It's something we do think about.  I could tell you there's nothing underway in Basel to  think about regulating fintech.  But it's something that we watch carefully.  And I think right now it's more of a supervisory  perspective when it comes to fintech in banks.  Andrea?  Well, the question of class would require a little bit of  time to answer.  But let's say I'm strongly convinced that there is an  important, we should first of all understand what we did  wrong in terms of getting to the current setting.  And there is interesting research which has been done  by Daniel Gross, comparing the banking union in the US and  in the EU.  And the banking union in the US, by the way, is rather recent.  It was introduced in 1994 with the Regal Neal Act.  So the way in which it worked is that you had shocks,  sometimes local shocks, in Puerto Rico, for instance, or  in Nevada.  And then you had the FDIC intervene with the  purchase and assumption approach.  So took over the assets and liabilities of the banks and  sold them to the best bidder, which in many cases were  bankers from other states in the US.  This meant that you had a lot of exit from the market, more  than 500 banks exited the market.  And this led to a restructuring and an absorption of  excess capacity in the US.  In the EU, we deployed sometimes European taxpayer's  money via the EFSF or the ESM.  But the restructuring process was mainly dealt nationally.  So you had some restructuring and some consolidation at the  national level.  But as Daniel said, you didn't have a lot of cross-border  mergers.  You didn't have a lot of more pop-up of this excess capacity.  And the inheritance of this is the low profitability that we  have right now.  So I think that the SSM is doing and should continue doing,  putting a lot of pressure on banks to achieve efficiency,  cutting costs, becoming a recovered profitability.  But there is a structural issue that we should, in my view,  address.  On the point on Jose Maria, I'm a bit in the same space as Bill.  I mean, of course, you would like to regulate activities.  The point is that it is firms that fail, not activities.  So from a prudential perspective, you  are forced to some extent to focus your attention  on the institutions rather than on the specific activity.  The construction we have is one in which banks  are the only institutions which are allowed  to combine deposit collection and lending  and another number of additional activities, which  means that they can create liquidity.  They provide liquidity to the economy.  So they are subject to a, let's say,  harsher regulatory requirement.  But there is something true, however, in what you say,  and I don't have an answer to that,  is that now you have other players  which are able to unpick different activities of the banks  and reassemble them in production chains, which  are outside the regulatory focus.  And how to deal with that, I must say,  today I don't have an answer, to be honest.  Thank you.  Before I give the floor, do you want to do one word?  Just on the, so I think both, OK, these questions  are complicated.  But one common thread between both questions  is the ability of the SSM to do what it has to do.  And one aspect of this question is the ability  of the financial firms to arbitrage the authority of the SSM  and through fintech, non-banks, and also, I would argue,  establishment of banks that are under significant institution  threshold arbitrage the SSM framework.  I think it's a fact that we have to recognize  that the SSM has established its credibility as a supervisor,  as was said before, as a supervisor  of significant institutions.  I think in the LSI, less significant institution  space, there's a lot to do still  to establish credibility.  I'm not saying that the system is failing.  I wouldn't go to that far.  But I think the transparency is not  there on what's happening in that segment of the banking  system.  And there are some concerning indications of arbitrage  that financial firms try to stay under the threshold  to have more favorable supervision, at least  in some member states.  And if that's the case, that create weaklings  that should be of concern.  One additional concern, of course,  which becomes very massive and not anecdotal at all  in the context of Brexit, is non-bank investment firms, which  establish themselves in the euro area,  but escape the supervision of the SSM.  So I think the investment firm regulation, of course,  is important here.  I'm not so optimistic that it will be adopted in a way that  tackles this issue convincingly.  But I think before talking about FinTech  and I'm not underestimating FinTech,  it's very important to create a framework that  deters and addresses this kind of arbitrage.  Here's a comparison with the US is actually enlightening,  because there is arbitrage in the US.  The US framework should not be idealized.  It's often ignored, mistakenly, that the SSM regulation  has taken off the table possibilities of the arbitrage  that will exist forever in the US by playing between state  and national license in the US.  In the euro zone, there are only the equivalent of US  national licenses, because all the licensing  is done by the SSM, even with the concerns I have about LSIs.  So this should be taken one step further.  And I think here the intent of the investment firm regulation  is important, but the outcome is still in doubt.  So it's very important that financial conglomerates  with the appropriate special provision for insurance  should be within the treaty, should  be supervised properly by the SSM.  And Brexit makes that a big, big challenge,  because we see so much of that kind of activity potentially  coming to the euro area.  And sometimes banks moving from inside the EU,  but outside the euro zone to the euro zone,  in order to be supervised, this is one of your success.  You have attracted.  Thanks.  Andreas, you wanted to.  Thank you.  Danielle was kind enough to invite me,  so at least I have to contribute a question.  And my question is the following.  Now, since the financial crisis regulation,  it's not the fault of Bill Cohen, has become very complex.  And that's rightly so for the large, very large,  systemically important banks.  May not be the right thing for the medium and smaller banks.  A little bit going contrary to what Nicola was saying.  And the real question is, because it is so complex  that some are overburdened, and the question would be,  what is the right approach for smaller and medium-sized banks?  Please bear in mind when you answer that Danielle herself  said we need diversity also in terms of size of banks.  Thank you.  Thank you.  I suggest as we are moving to the end,  but the previous panel was a little bit later.  So we are moving to the end of my slot.  I think it's a nice question to conclude,  and I suggest I will give the floor to all of you.  And so the question, if you have a strong message,  it's the moment.  Bill.  I could be brief.  Is it a strong message?  It's an easy answer, Andreas, from my perspective.  The Bilesville Committee produces rules for large,  internationally active banks, full stop.  How those rules are applied, whether they're  applied proportionally in a jurisdiction,  that's not my concern.  The US, of course, has its proposals out on tailoring.  Most organizations, most jurisdictions around the world,  provide some kind of proportionate application  of the rules.  I do note, though, and I see several in this room,  people come to Basel, and they say,  the rules you guys are making, it doesn't make sense  for cooperative banks in Europe or savings banks.  And I say, well, that's not my, perhaps I agree with you,  but you ought to talk to the leadership in Europe,  because it really is, it's not a Bilesville Committee decision.  Well, maybe Sven will answer in the next panel.  Nicolas.  It's a challenge.  It's a difficult challenge.  I think it will take us time to settle,  because in the Euro area, we have two offsetting tasks.  We want to make sure that there is a level playing field,  and that, to a certain extent, exists in the US,  because it's a federal framework for all the reasons we know.  So I think there has to be a dedicated effort  to make sure that there is at least a minimum level  of supervisory quality across the board,  including for LSIs.  And this is where I see unfinished business for the SSM  so far.  And at the same time, you're right.  I mean, we have a principle of proportionality and subsidiarity,  and it should be a driver of having some lighter burden  for smaller banks, to a certain extent, maybe in things  like reporting and so on.  But we also have made a choice, historically,  as Bill reminded us in Europe, to have  similar legislation for all banks, no matter their size.  That's a matter of the European legislators.  Personally, I think that it's inevitable  that we go through a phase of slightly burdensome, very  annoying harmonization of the minimum supervisory quality  for all banks, including small ones.  And the SSM has to take leadership on this,  and it's going to be resisted by all kinds of interests,  particularly in member states, which  have a lot of those small banks.  But I think this is necessary because otherwise it's  a problem for the credibility of the system.  And once this minimum level has been established,  then there will be a case for loosening the framework  in a controlled way for the smaller banks.  But I don't think we can avoid that phase.  So there has been a very thoughtful paper  that I encourage everybody to read by Fernando Restoy  on what he calls the middle class of banks, medium-sized banks,  which have to issue MRAIL and that disruptive for them.  I think it sets the challenges appropriately.  So I will conclude on that.  Thank you.  Andre, are you looking for what a boring, annoying, heavy work?  More or less, it's what he's proposing for you.  Well, I never shy away from boring work  when it is important in terms of the achievement.  So no problem with that.  In terms of the question of proportionality,  I think we need to be very careful in distinguishing  two concepts of proportionality.  One is the very legitimate, I think,  request from small banks, specialized institutions,  and the like that think that the compliance burden on them  is not commensurate with the type of business model they have.  And that is true.  I mean, we have developed an incredibly complex regulatory  system and applying it to a small cooperative  with very few, let's say, staff.  I mean, sometimes it's daunting task.  So if we can do something to lower the burden on smaller banks,  I think we should do it.  And I think that there are also new options, which are provided  also by new technology.  I mean, some people are talking about the reg tech  all the time.  I mean, for instance, on reporting,  we couldn't, should probably, develop a system in which  a small bank is able to select of the thousands and thousands  reporting sales that they are supposed to feel, which ones  are relevant for them and to have something that helps them  in doing this job.  The other point is, instead, proportionality  intended as lighter requirements, so less stringent  requirements for smaller banks.  And here, I think we must be much more careful, especially.  It depends.  I mean, there are some areas in which maybe MRAIL is one,  governance is another one in which you need to tailor  a little bit the requirement.  But in key prudential requirements, capital,  liquidity, and the like, I would be very reluctant to have  differential treatment.  I've seen that other jurisdictions are going that  direction.  I saw, for instance, in the US a few weeks ago that they are  applying a lower requirement, for instance, on the NSFR to  smaller banks, where smaller banks are banks up to $200  billion in assets, so not that small, I would say.  And Billy's right.  These are not banks which are under the  remit of the Basel Committee.  But in my view, having a two-tier approach in terms of  stringency of the requirements, I mean, this can create, let's  say, as also Nicola was hinting, let's say, this incentive  for banks to grow in an attempt to remain at lower levels of  asset size and the like to escape more stringent  requirements.  And that could be, in my view, also, eventually, as we have  seen very much in Europe, I mean, these banks tend to go  down the drain in a hurt sometimes.  And they can create systemic problems as well.  So in terms of stringency of the requirements, I would be a  little bit less willing to go all the way.  OK, thank you, all of you.  We are going to move to the next panel.  And once again, we all be treated to Daniel.
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