00:00It was your last ever shareholder meeting at SockGen yesterday. So I want to start there because you've been more
00:06than a decade at SockGen.
00:08How has it changed since 2015? Well, many things have changed. The management changed. The governance of the bank has
00:17changed.
00:17I think we have left, I would say, a best-in-class governance, which has been able to foresee the
00:26change in management.
00:29The last two years have been really a turnaround for the bank. I live with the share price about 60
00:36percent higher than when I joined.
00:38Not bad. It's not bad. I can't complain.
00:40But it's been a long process and difficult times for the world economy, COVID, Russia.
00:48We had the Russian banks. We had to exit quite rapidly, actually. We did it.
00:54But now things are better and there's a long way to go. But things are much improving.
01:00I'm very confident that my successors will do the right thing.
01:04So when will SockGen start thinking about substantial acquisitions then?
01:08Well, we have done a few things, like Allianz-Bergstein, for instance.
01:14The restructuring is not fully over. I think it's going to take a couple of years.
01:20But the environment is changing. The valuation of banks has changed.
01:27So shareholders are starting to ask, what's next? Where's growth coming from?
01:31And that's where I think some consolidation and acquisitions will take place.
01:36And you'll probably hear from there at that point that things will happen, I think.
01:41OK, one to watch out for. Over the years, Lorenzo, you've been very critical of how Europe supervises and regulates
01:47its banks.
01:47On supervision, do you think that the ECB has done enough to make its supervision of banks less burdensome?
01:54No, I couldn't say I've been critical. I think we have to discuss these issues.
01:59There are no, you know, no sacred chaos.
02:03What I'm struck is that, you know, at the Fed, Kevin Walsh is stepping in,
02:08and he wrote an article a few months ago saying Basel's endgame is not America's endgame.
02:14So after 10 years, you know, we have to rethink issues.
02:18In Europe, you know, we kind of have difficulties in questioning whether really what we've done over the last 10
02:25years is in the interest of Europe.
02:27Just asking the question and trying to reassess whether we may want to change certain things or not.
02:34So the idea that just going through with what we have agreed 10 years ago is the best for Europe,
02:41it's not, I think, it's not the smartest way forward.
02:45So I think we should engage with the supervisor and we discuss openly.
02:50The supervisor said we need to simplify.
02:52We haven't seen many simplifications so far and the burden on banks.
02:56And the result is that basically bank credit is going down in Europe, if you look, not only continental Europe,
03:04but if you deflate by inflation, banks are lending less.
03:09And you have these new operators, new institutions like private credit, which are growing.
03:15And they are not supervised.
03:17So is this in the interest of stability in Europe, that banks have a lesser role than others?
03:23So these are the kind of questions we should have the courage to discuss openly.
03:28Do you notice that the tone from the top of the ECB is filtering through to the staff that you
03:32were supervising on a day-to-day basis at the bank?
03:35I mean, I think things are changing gradually.
03:38But frankly, things are changing much more quickly in the US and probably a little bit in the UK also.
03:44So we can't be the last ones in continental Europe to adapt to a changing world.
03:50So just asking, you know, all these measures we have put in place, all these stacks of capital that are
03:56not very transparent.
03:57Is this good for the real economy?
03:59Is this good for financial stability?
04:01I think there is a lot to discuss and probably some rationalisation would be very useful.
04:07Well, we're waiting for the European Commission's report on banking competitiveness.
04:10What do you want to see in it?
04:13Well, you know, there's a lot of, you know, let's compare with the US, let's compare with, but in the
04:18end what matters is the results.
04:19The result is that in the US, bank credit is going up, in Europe it's going down.
04:25So something, and it's not just, I'm thinking, you know, it's going up in real terms and in percent of
04:32GDP.
04:32So it's not an issue of demand, it's an issue of supply.
04:35Let's face it.
04:37Then let's see, you know, what are the measures that really can improve the competitiveness.
04:42So that's what I'm expecting from the Commission.
04:44You know, how can we improve the competitiveness of the banking system in Europe?
04:48Well, perhaps we could see something on the treatment of software investments, leveraged loans.
04:53Does that sound like the sort of thing?
04:54Well, you have a lot of ideas.
04:55Maybe you should talk to the European Commission.
04:58Well, we'll wait for the report.
05:00Yes.
05:01Let's talk about private credit as well, because you've also previously lamented that private credit isn't subject to the same
05:06rules as banks.
05:07Some would say that that's rightly so, given that they don't take deposits, right?
05:12But at the same time, the SOCGEN CEOs worked with private credit for years.
05:16So how do you see the relationship between private credit and banks developing?
05:20Are they more competitors?
05:22Are they partners?
05:23No, they are both, I would say.
05:26It's very useful for us because we can offload part of our balance sheet.
05:30Working together so we can make new loans.
05:33But that's due, so this originate and distributes that kind of work that we do with private credit, that's very
05:39useful.
05:39But on the other hand, the treatment that this credit has in terms of regulatory transparency, that's not so obvious.
05:49So we need more of a level playing field to be sure that if something happens, I mean, the private
05:56credit is so big now that if something happens systemically, you just can't say it's a small portion of the
06:03economy.
06:03It's a big portion of the financial system.
06:05It will affect the rest of the markets, so we have to be attentive to that.
06:11So we need to call how long can people stand here yet.
06:11We take advantage of that and effect.
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