Financial Times, 7 september 2011

Passera: Banking system safer now

QUESTION: Welcome to the FTs Future of Banking Series. I have with me now Corrado Passera, chief executive of Intesa Sanpaolo, Italys largest retail bank and one of Europes largest banks. Mr. Passera, thank you very much indeed for being with us today. We are broadly looking at, at the moment, during this series, given the changes weve seen in the banking system over the last four years since 2007, how in your view, is the banking system different than it was in September four years ago? PASSERA: If the question is, is the banking system safer, the answer is yes. Weve done a lot of work, regulators have done a lot of work, stronger capital, stricter liquidity rules. So thats already a lot. Probably, if we compare 2007, 2008 and today, we dont have in front of us the kind of recession that the world had a few years ago. So, because of all these reasons, we can say that the banking system as a whole is safer. Then, you know, the banking system is a zoo with many different animals, so everyone has his own characteristics. QUESTION: But is it too safe? Would that be PASSERA: No, I wouldnt say so. I think we made a number of good steps in the right direction. Capital in itself is not enough to prevent banks from having troubles, but a good level, the right level of leverage and capital is certainly a move in the right direction. Liquidity rules that will have to be applied in a number of years maybe are even a bit stricter, but the direction is certainly the right one. Too many rules? Maybe were running that risk. But what we have done so far is reasonable. There is still the big area of derivatives that would need some more attention and some more regulations. But as of today, I would say we have done a good job altogether. QUESTION: Do you feel, given you have these big regulations changes taking place in the US, in Europe, in the UK, how is this affecting the competitiveness of these regions, compared with other regions, Asia in particular? PASSERA: The safeness of the banking system is a strong element of competitiveness in itself. So, thats the first point. Second, we have not yet levelled the playing field well enough within Europe, within the Western World and at the global level. So we certainly suffer from a number of distortions that will have to be addressed and fixed, but first lets make this system safe and that is something that certainly we have done.

QUESTION: And the outlook for profitability then, turning to that, what is your view for the banking system, for the European banking systems for starters, for the next few years? PASSERA: Each segment of the system, in my opinion, is finding new equilibrium and Im not at all negative for the future outlook of profitability in any of the segments of the banking system, certainly in ours. QUESTION: So, speaking about Intesa, you consider yourselves a real economy bank. Would that be correct? PASSERA: We are a real economy bank. QUESTION: Absolutely. And thinking then with regard to the impact of, say, profitability, but also the regulatory system that weve been discussing, what will the trickle down effect be on consumers in the real economy from these changes were seeing, if any at all? PASSERA: No, no. The stronger capital requirements and the stricter liquidity requirements - and we are amongst the very few banks that are already compliant today with 2018-19 targets make capital liquidity even more precious resources, so the management of the bank has to be more focused and more sophisticated, more capable to give value to these scarce resources. And were doing it. As of today, we havent seen, at least in the countries where we operate, any credit crunch because of these new rules. Obviously these rules do not have to be pushed too far, because if you go too far in terms of capital requirements, then the cost of credit becomes very inefficient for the economy. But, as of today, and we accepted the new normal, the 10 per cent /---/ and then common equity level is not inconsistent with credit development and growth in our economy.