Moving in the Right Direction

Optimism at Banking Sector Meeting

14/12/2012

José Manuel González-Páramo

A mood of cautious optimism prevailed at the 8th Banking Sector meeting held on IESE’s Madrid campus yesterday. The general view was that the system is more stable and is functioning better thanks to far-reaching reforms. "All the measures taken have been moves in the right direction," one speaker said.

The meeting was organized jointly by IESE’s Center for International Finance and Ernst & Young and brought together some 150 professionals to discuss "The Bank: Opportunities After the Crisis." Prof.Juan J. Toribio, president of CIF said that "every day that passes is one less day before the crisis ends."

Jose M. Andrés, president of Ernst & Young, said the Spanish banking system would be one of the best in the world. However, the outlook for Spain itself is far from rosy, according to Prof. José M. González-Páramo. "Spain is in deep recession and there’s not much prospect of the situation improving in the short term. Although risks in the euro zone have declined, he lamented the fact that the recovery is "too slow" and the markets remain "fragmented."

"Monetary union without financial integration threatens the proper nature of the euro: the fungibility of money," the professor said.

In the session on regulation and supervision Jaime Caruana of the Bank for International Settlements said that "regulation is one factor behind changes in the financial system but it’s not the only one." He said the crisis had changed our perception of risk, adding that "only well capitalized entities should offer credit."

In a discussion on the future of the sector Ángel Cano, CEO of BBVA, commented that the crisis had "dynamited the entire financial system." However, other elements had contributed, he said, such as changes in the order of world growth, technology as a motor of change and consumer pressure.

In conclusion, Luis M. Linde, governor of the Bank of Spain, welcomed the decision reached by Ecofin over supervision. "It’s very important. Two or three years ago no one believed an agreement could be reached in the short term. The crisis has speeded the initiative. It sends out a very positive message to the markets that there will be no going back on the euro," Linde said.