Possible Models of Retail Banking in Europe

Session 2: EU Financial

Session 2: EU Financial

Panel

Wolfgang Neumann, Chairman of the World Saving Banks Institute and the European Savings Banks Group Committee; Sjerp Van Der Vaart, Director of Information Office of the European Parliament to the Kingdom of Belgium; Sébastien de Brower, Executive Director of Retail Financial Services, European Banking Federation; Albert Verlinden, Vice President of the Association of Bank and Insurance Advisors; and Josep Soler, Chairman of the European Financial Planning Association.

The second session of the Second Plus Europe Conference was planned to explain Possible Models of Retail Banking in Europe. The moderator of the debate, Josep Soler, opened the discussion with a challenging question: How can we regain the trust of customers in credit institutions? According to Soler, a possible solution would be to improve legal protection of customers and introduce the professional responsibility of bankers.

According to Josep Soler, a possible solution to regain the trust of the consumers would be to improve its legal protection and introduce the professional responsibility of bankers
He also indicated the possibility to impose fiduciary duties on bankers in their relation with customers. The debate did not continue strictly according to the topic of the session. The fact that the banking system is still an open wound in Europe made the speakers talk about the banking model in broader terms. The participants of the panel commented on the European reaction to the global financial crisis, reviewed the recently adopted banking regulation in the European Union and also touched upon the Banking Union in the euro area. The overregulation was one of the concerns of the speakers.

Wolfgang Neumann commented on the German banking sector and recalled that long before the crisis, the ideas coming from the European Union were to deregulate the banking system with emphasis on the private character of a credit institution. He highlighted the importance of the local banking. He also pointed out that local banks tend to invest in local enterprises and that Germany came out of the crisis thanks to a strong small and medium size enterprise sector. Neumann’s main advice was to diversify the banking system, assuring the coexistence of small, big and medium size banks.

Sébastien de Brouwer also put an emphasis on the need of a pluralistic banking sector in Europe. He commented on the important cost of compliance with the new regulations related to investor and consumer protection. Mr. De Brouwer referred to the CDR II Package (Transposition of the Basel III Package into European binding law) and highlighted that the new regulation has one main objective which is to avoid tax payers to pay for banks mistakes when they become insolvent.

New tendency in customer approach

Concerning the retail banking, De Brouwer commented on the new tendency in customer approach. He explained that nowadays customers have no difficulty in switching between banks since loyalty does not play a big role anymore. This attitude is partly caused by the digitalisation of the sector where a customer can access financial services through virtual platforms.

Sjerp van der Vaart, expressed his opinions about the sharp contrast between banking model in the 90s and what we face now. He pointed out that two decades ago the regulation and supervision did not exist and that now the Banking Union is drastically changing the model.

Sjerp van der Vaart touched upon the risk of overregulation and the need to stop any regulatory measure which impedes the advancement and the competitiveness
 He commented that thanks to the new regulation there will not be more bailouts for tax payers and that the Single Supervisory Mechanism will definitely improve the surveillance of credit institutions in the Banking Union.

He also left the public with few questions: How competitive can our bank system be in 2025? Can the European Central Bank cope with the new authorities? Can the Economic Union survive without the Social Union? He finally touched upon the risk of overregulation and the need to stop any regulatory measure which impedes the advancement and the competitiveness. He indicated that the new capital requirements impede the access to financing for small and medium size enterprises.

Retail banking

Albert Verlinden commented that financial crisis led to reduction of numbers of financial institutions and that many decided to merge to survive. This caused that employees that considered each other’s competitors were suddenly working under the same flags. Concerning the retail banking, Verlinden advised that financial institutions should focus more on giving right advice to their customers instead of only selling commercial products.

After the interventions of the panel the public was given the floor. The audience raised a question concerning the diversification of the banking sector and also inquired about the mortgage market in Europe.

Rapporteurs: Aleksandra Czajka (University Pompeu Fabra, Barcelona) & Zuzana Petrovkova (University of Economics, Prague). Edited by the Plus Europe Association.