European banking industry should aim to be at the forefront in providing strategies for the major issues of the day, conference told

News - Banking

Written by Ray Clancy

Thursday, 16 September 2010 08:28

The banking industry in Europe should take the lead in providing strategies and solutions to the big questions of the day by working closely with authorities in an open and co-operative way, banking leaders have been told.

Angela Knight, chief executive of the British Bankers’ Association told a seminar in Paris on the future of the European Banking Industry that the potential for better coordination between the European Union countries and the role that the new supervisory authorities can play in harmonising rules, colleges of regulators and in crisis situations is to be welcomed.

‘We all recognise though that the major banks of Europe operate in many countries of the world. And although it is easier to think of cross border activity as meaning from one European country to another, and this may be the case for a great many, for the large banks cross border can mean any country in the world,’ she said.

‘We have the great good fortune and the great economic benefit of having the Europe, Middle East and Africa headquarters of multi-national corporations here in Europe and not in those other two regions. As the new structures in Europe develop, internationality needs to be part of the focus,’ she told delegates.

She explained that how the interface between the EU and the rest of the world is tailored is vital and also the rhetoric must be outward looking, creating assurances that the change programme in Europe will be well crafted and welcoming.

‘At the BBA and with our members we consider that the banking industry should take the lead in providing solutions and strategies to the big questions of the day, obviously working with authorities in an open and cooperative way. It is after all the industry which knows most about the industry. So creating our own future is better than leaving it to others,’ she added.

One issue that needs to be addresses is what to do when a big bank gets into difficulties. ‘In the UK we are of the view that a bank should be allowed to fail, but the manner in which that failure is managed and controlled is where more work needs to be undertaken,’ Knight said.

That would mean looking at a recovery and resolution plan, the potential role for contingent capital and bail-in mechanisms and also taking into account the views of investors.

Looking ahead, she said that restoring the reputation of the financial system and the banking industry is clearly necessary. ‘Although it was only a few banks that got into difficulty, we are all captured by those failures, the hostility of our people and the changes that are being made. It is difficult to describe the importance of banking to people; the language is difficult and the language is complex, but a vibrant effective and profitable banking industry is essential for any modern economy,’ Knight told the meeting.

‘Improving the reputation of the industry is as much a part of the future as making the practical changes to our capital ratios,’ she added.