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March 2016

European CIBs: regaining control

Marie-Anne Barbat-Layani, Directrice générale de la FBF

In the last 10 years, European corporate and investment banks have lost 10 points in terms of market share on their own territory, almost all of which went to their US competitors. Europe cannot ignore such rapid, radical change.

Last year, European CIBs accounted for only 46% of their domestic market. A turning point has been reached, especially with their US competitors nipping at their heels. These figures come from a report by Bruegel, a think-tank known for its independence and financial and banking expertise. The trend is so relentless that the authors have sounded the alarm: "The United States dominates global investment banking: does it matter for Europe?" The answer is clear from the question.

Yes, we should be concerned about European CIBs gradually losing their influence. First, because in a global industry like investment banking, the ability to rely on a solid domestic base is critical. This lesson is well understood in the United States, where Wall Street CIBs have carved out the lion's share of their market. The second reason is that having strong, effective CIBs that serve their clients has become an absolute necessity for companies' competitiveness. We are currently measuring the boomerang effect of the first stage of post-crisis regulations and its impact on banking activity and the size of bank balance sheets that vary widely between Europe and the United States. Although the financial crisis was triggered by the US banks, and in particular by Wall Street CIBs with the collapse of Lehman Brothers, banking mergers in the US created financial juggernauts that are on a quest to conquer Europe. Add to this regulations that are, generally, structurally much more advantageous to US banks, when Europe does not shoot itself in the foot by favouring them.

Here lies the crux of the matter: how useful are CIBs in a model for financing the economy that is undergoing profound change, with the markets playing an increasing role? The European Commission has drawn its own conclusions, making capital markets union one of its priorities. It therefore cannot simultaneously resign itself to seeing its corporate and investment banks give up ground. It is also critical to weigh the consequences of any future regulatory changes regarding the competitiveness of our CIBs. They are up against fierce competition, and we must be very careful not to hold them back by, for example, fruitlessly calling into question the universal banking model. In its conclusion, Bruegel urges the European Commission to view its banking and financial industry as a strategic sector. We could not have said it any better ourselves.

Marie-Anne Barbat-Layani
Chief Executive Officer of the French Banking Federation

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Our Positions

Talking to kids about money is no longer taboo
Talking to kids at school about money is no longer taboo, and it's almost never too early to start the conversation. That's why the French Banking Federation is getting involved in European Money Week, an initiative of the European Banking Federation taking place from 14 to 18 March. As part of its "Keys to Banking" program, the FBF and its regional committees are organising the second annual "J'invite un banquier dans ma classe" initiative to provide pupils aged 8 to 11 in around 100 classes with basic lessons on budgeting. The idea is to educate through games and conversations. Teachers interested in participating are able to invite a banker to answer pupils' questions while playing a board game which teaches kids elementary rules about managing their pocket money responsibly. This 100% educational and fun initiative, organized in line with an ethics charter, is strictly non-commercial.

Read more

Even better protected deposits
Is the money that I deposit at the bank safe? What safeguards will I benefit from if my bank runs into difficulties? These questions from depositors and savers, which could not be more relevant, are often arising in the news. For several years, all of the initiatives adopted by regulators and supervisors have been to provide the best guarantees possible in terms of the security of assets. Without going into detail regarding the various strengthened security systems which led to banks doubling their total capital, the most recent progress in this area came with the coming into effect of the so-called resolution directive on 1 January 2016. In addition to a range of preventive measures, this system requires banks to have sufficient resources available in order to weather any potential difficulties, without dipping into the pockets of governments or depositors. In France, the Deposit Guarantee Fund offers an additional safeguard for bank clients. In short, deposits have never been so well protected.

In their own words

François Villeroy de Galhau, Governor of the Bank of France

"The fact is that French banks today are very sound, far more so that before the crisis of 2007-2008. the CET1 capital adequacy ratio, which is core capital in relation to risks, doubled between 2008 and 2015 from 5.8% to 12%, i.e. a €132 billion increase in capital following the welcome strengthening of regulations."
Paris, March 2, 2016, testimony to the National Assembly Finance Committee.

FBF in the media

Option Finance

3/7/2016

Finance: French companies preferred over European peers

The magazine Option Finance has been celebrating good figures for funding companies in France, regarding both total outstanding amounts and interest rates. The magazine, using ECB figures, writes that at end-December total lending to companies grew by 3.3% in France having barely remained flat in the euro zone. The average interest rate for French companies is 1.97%, compared to a 2.65% average across the zone.


Marianne

3/4/2016

Beware prepaid cards!

The French Banking Federation is pushing for less anonymity in payment methods to make transactions more traceable. Marianne magazine reports in its March 4 edition on prepaid cards and the security risks they could pose. As Marianne says, since 2011 Tracfin, the French Finance Ministry's anti-money laundering and anti-terrorist financing unit, has been highlighting the threats linked to these cards. When asked about this, Willy Dubost, Head of Payments and Systems at the FBF, underlined the risks weighing on payment systems due to this anonymity.


Le Figaro

3/4/2016

Property sector lines up with defenders of fixed-rate mortgages

Several professional bodies in the property sector have been warning in the pages of the Figaro about the Basel Committee's proposals for managing interest rate and credit risk and the consequences they could have for home financing in France. This is a battle that the FBF has been fighting for several months. When asked about this point, Marie-Anne Barbat-Layani reminded the Figaro that French banks, as well as their clients, are very attached to fixed-rate mortgages. Banks are better placed than individuals to manage interest rate risk in the mortgage industry, and French mortgages are extremely safe. If the equilibrium of the system should come under threat, it would be the borrowers who would lose out, with no benefit for financial security!


Agenda

March
14 - 18

European Money Week, in which the FBF is participating through the "J'invite un banquier dans ma classe" initiative

March
17

Payforum 2016, Paris - Speech by Marie-Anne Barbat-Layani

March
22

Best Financial Article 2016 award presented by Marie-Anne Barbat-Layani (in partnership with the French Association of Economic and Financial Journalists and the Banque de France)

March
29

FBF will be a partner at the “Rencontres Euro PP”, Paris - Introduction by Michel Sapin

April
5

Conference on “Combating terrorist financing: regulations, methods and repression in France, Europe and the United States”, organised by ESCP Europe in Paris - Speech by Marie-Anne Barbat-Layani

April
6

Conference on “Blockchain Disruption” organised by Development Institute International (Dii) - Speech by Willy Dubost

Tweet of the month

Figure of the month

#Fixed interest rates #guarantee #solvency of French households: distribution model #Solid French mortgage market
@FBFFrance

46% of managers are women in the French banking sector (Source: Annual AFB survey of member banks. Figures at 31/12/2014)