Andrea Enria has a great view. He works on the 46th floor of the skyscraper One Canada Square in the heart of London’s financial district Canary Wharf, looking down the River Thames, which snakes its way here to high-rise buildings. Since 2011 Enria, 54 years old, head of the European Banking Authority (EBA). The Authority was established in response to the financial crisis. The Italian is primarily responsible for creating a uniform regulation of the former crisis industry. However, it could be that Enria the workplace with the great view is soon going – if the British leave the EU.
The world : Nice office, Mr Enria. How long are you still here
Andrea Enria: Of course we are glad to be here in London, all European banks come sooner or later here. When the British opt for a withdrawal from the EU, but we would have to resettle in another European capital. However, we now must not be distracted from our primary purpose to complete the regulatory reform program us. This work needs to be done – no matter how the referendum goes out. We must ensure that there are no different rules for countries that have the euro, and those who do not have it.
the world : the British fear exactly that: that they are isolated in the face of the dominance of the euro countries in the EU. Many even mentions the fact that the UK could be forced to adopt the euro
Enria . I know. The European Central Bank will further harmonization within the euro area demand in the long term – and countries like the UK fear that they will be pushed even further changes, although they do not belong to the euro. I believe that we must find a balance here, which is acceptable to all 28 EU countries.
the world : If you manage that? Especially in the early years there were strong tensions between your supervision, the EBA, and a number of national regulators, for example, the German BaFin.
Enria : Do not forget that we started a very difficult time: the middle of the financial crisis. It is only natural that there is tension with the national authorities. Finally, the need to change their processes with which they until yesterday – have worked – I exaggerate. From my time at the Bank of Italy, I know how difficult it is to adjust. Nevertheless, it is important that we have the same answers to the questions of the banks.
The World : have not the British replies as you when it comes to the regulation of its financial sector
Enria : There is a strong consensus, where the journey should go. In the meantime, there were debates about how much authority should remain with the national authorities. Now the national supervisory authorities have a lot of freedom to adapt the regulatory provisions to the needs of their country. Let me add something: In this country, there is often the idea that the rules in Brussels be made. This creates a lot of the rules for banking regulation here in London with the EBA, and we also try too hard.
the world : So you do not share the fears of the British that they must either join the euro at some point or are meaningless
?
Enria : No. The EBA is responsible for the entire European market. We have voting rules that allow the countries to be protected, not participating in the banking union. You can adopt any rules, if you do not have a majority of non-euro countries. We should not forget that the single market was originally a British idea. It includes more than just the countries of the euro zone.
The world : you have spent the aim to provide a consistent framework for the European banking industry, called the single rule book. Now you think, so to be almost ready, and want to stop the unification process. Why
Enria : We have a point reached at which we must give industry certainty. The uncertainty harms otherwise the ability of banks to finance itself on the market and fulfill their function.
The world : One of the reasons for this uncertainty but is just, that although there are uniform standards, but they are interpreted differently by the national regulatory authorities. Not all mean the same thing when they speak as liquidity on such important terms. This has practical consequences: for example, that banks have problems to calculate their capital requirements properly
Enria . : There are many different definitions, it is. This leads to some significant variations in different countries. In the long run we must therefore our standards harmonize
The World . What does it mean for the European banks, that there are no uniform rules?
Enria : The banking sector has become much more stable than it was five years ago. Nevertheless, 5.8 per cent of loans in Europe are still in default – a value at which suffers, according to the International Monetary Fund, lending to the real economy. Therefore, the ECB also fail, as required to increase the lending and generate more growth. The problems are very unevenly distributed. In Cyprus, Greece, Slovenia, Italy, Portugal and Ireland, the number of bad loans is still very high. Especially smaller institutions have loans that are of much poorer quality than that of the major banks.
The World : Is not your fault than banking supervisors
Enria : Well, if you look around, then we have the same monetary policy and interest rates the same, yet very different Profitabilitäten. There are eight countries in which the return on capital of banks is more than ten percent. And five countries where it is one percent or even less. The rules alone therefore can not be the problem.
The World : What must the banks do to solve this problem
Enria : you must do what is in their power – so take care as to their non-performing loans. They should also adapt their business culture. Several years after the onset of the financial crisis, they are still paying high penalties. This has a natural effect on the profitability. Then there is the cost structure of many banks. There is still overcapacity in the European banking sector, and that hinders the recovery of this sector.
The World so you call for greater consolidation
Enria : Yes, that could be a solution. If the balance sheets of banks you look at, you can already ask whether such a low profitability and such a low return on investment in the long term are sustainable.
The world : This is clear. But why do not announce whether a bank has passed your stress test
Enria : There were several reasons. In the past two stress tests it was felt that the capital base in the European banking system was insufficient. Therefore we needed a threshold, so that the banks acquired additional capital. Now the banks are much better capitalized, so they have to take no further capital.
The World your stress test was yet another reason very under fire
Enria : Because of the static bank balance sheets, with which we have worked. In our scenario, the banks were not allowed to respond to cushion the effects of a crisis, but had to let them go through. This of course is not very realistic. In real life, the banks would react to a crisis. A test with more than 50 banks only works if one is not working with static with dynamic bank balance sheets.
the world : About the test of talk in the industry for a long time. The population on the other hand says the EBA still nothing
Enria . If regulators as I found on the front pages of newspapers, which is usually not a good sign. Nobody notices us mind if we do our job well. It’s just very technical. In addition: European affairs are still seen very through national lenses. This prevents the European progress. Here in the UK, the EU is often seen as a bunch of aliens who lives on another planet, instead of national institutions that cooperate as a group for the common good. This is a shame, but we have to live.
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