00:00Last Friday, the European Commission unveiled proposals aimed at making European banks more
00:05competitive. It's widely seen as a move to close the gap with U.S. rivals. Well, on Friday,
00:11our correspondent, Sasha Vakulina, caught up with the European Commissioner for Financial Services,
00:15Maria-Louise Albuquerque, and started by asking her what impact she hoped the proposals could
00:20have for European citizens and businesses. Banks are very important in the European economy.
00:27They're important for citizens. They're important for businesses, for financing. So we need them
00:33to be efficient and to work well. We have found a few problems which need to be addressed. And we
00:40have, with this diagnosis, also indicated the way forward. So it is about making our banking sector
00:48better prepared to support citizens, businesses, and the Europeans' ambitions and vision for the future.
00:57And what is the key aspect here when it comes to the Europeans, to ordinary saving? You focus on
01:03this category. What is the key?
01:05People typically go to banks for one of two things. Either they need to borrow money for a mortgage,
01:12for whatever objective. They should have banks which are efficient, but also competitive,
01:19so that people can compare different offers and choose the one which is best. But also people save
01:26money and put money aside for a rainy day, for a pension, for whatever reason. And banks are often
01:34the agents, the intermediaries that people go to. So the more efficient the banks are, the more competitive
01:44the system is, the better will be the offer of such opportunities for our households wanting to save and
01:50invest their money.
01:51When we look at the world of big powers, does Europe need more cross-border mergers, meaning
01:56probably fewer but bigger European banks and therefore more consolidation?
02:02Yes, we need a few big banks. But if we compare the average size of even the bigger European banks
02:13and our
02:14competitors, who also operate in Europe, by the way, namely American banks, the size is completely
02:21different. And for some areas of business, that scale really matters. We have identified the fragmentation
02:29of the banking sector or the incompleteness of the single market in banking as the main problem holding us back
02:38in terms of competitiveness. That is actually the bigger problem we have discovered. This makes it very inefficient.
02:46This perspective of looking at member states in isolation is actually very costly to the European economy. I think that
02:54member states, they come from the past where we looked at this from a national perspective, but I think we
03:02have all realized
03:03that our true competitors are other blocs. So it's Europe together with our other competitors. And that requires that change
03:15in mindset.
03:16Of course, it's difficult. It's a significant change. And there is a normal resistance to change. But I think the
03:24fact that there is
03:25awareness and the conscience that the costs of not moving are increasing, I think we have now better conditions to
03:33deliver on those objectives.
03:35The report argues that Europe's banks need to take more risk if they are to finance growth and compete globally.
03:44Where do you draw the line between encouraging certain risk taking and avoiding the mistakes that led to previous financial
03:51crisis?
03:51It's not banks that need to take more risk. It's the whole Europe that needs to have a different approach
03:59to risk.
04:00So because of how we are, I don't know, also because of cultural elements, but because of some inefficiencies in
04:10our system and still the legacy of the previous crisis, we focused a lot on reducing and trying to eliminate
04:18risk.
04:19But if you eliminate risk, you eliminate opportunities. We know that risk taking is indispensable for innovation, for economic growth.
04:27So what we are talking about here is a recalibration. Now, we need to adjust the parameters of the framework
04:34to say that some more risk taking should be considered in the system as a whole when it comes to
04:43financing certain activities.
04:45But this is the political discussion. How much risk are we comfortable to allow into the system preserving financial stability?
04:54Because financial stability is a precondition. Without financial stability, nothing else works.
04:59So we need to find the right balance. What we are talking about here is rebalancing, allowing some more risk
05:06while preserving financial stability.
05:08It's a recalibration. It's not going back to the past because we have learned the lessons and we are much
05:14better prepared to manage risk in a sound and prudent manner now.
05:19and it can be a little bit more careful about that system.
05:19So how do we have to get one?
05:19So we have to manage is out there.
05:19So if you like, you can get back to the next generation.
05:20No, I am better looking after it here.
05:21Amen.
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