“Customers do not dream of banking when they wake up in the morning”

This is the short version, the full article can be found here.

The key positions in two financial sector federations have been taken up by two newcomers  who are already well-known, i.e. Wim Mijs as CEO of the European Banking Federation and Rik Vandenberghe as chairman of Febelfin. 360° has asked them about their opinion on the present-day financial landscape, tomorrow’s players and the role of Brussels.

Both of you have an impressive track record in the banking sector. Can you tell us something about the key moments?

Wim Mijs (WM): For me, the first key moment was when I took part in the internal ABN AMRO training programme, which, at that moment was one of the best known training programmes in the Netherlands and gave me the occasion to learn about many things. Then there was also the period I spent in Brussels at the time of the Financial Services Action Plan. I was a privileged observer of politics. Finally, there was my job at the Nederlandse Vereniging van Banken, right in the middle of the financial crisis when the pressure on our members was immense.

Rik Vandenberghe (RV): All through my career, I have worked at the same institution. Thirty years ago, I started my career at BBL. This institution also offered a similar quality training, but I never took part in it. This proves that in fact, there is no standard way of climbing up. What was typical for me, I think, was that I often accepted jobs others kindly refused to do. Most of those jobs had to be done in difficult circumstances, but allowed you to learn a lot. In many cases, one thing automatically flows from another and people also start asking you for other functions.

ING Luxemburg went through some major changes under your direction.

RV: That was just before the crisis and indeed, there were some challenges to be taken up. The bank depended to a large extent on  group activities, private banking and funds, the branch network was losing money and the retail business suffered from a number of shortcomings. However, I am proud to say that ING Luxemburg had turned into a very profitable bank when I left, in spite of the fact that the crisis had already set in at that time. What I was most satisfied about though, was that the same people who first felt reluctant about changing, had turned into the driving force behind this transformation at the moment when I left.

Mr Mijs, you have made the switch from the Dutch level to the European level. Given your experience, what do you think about goldplating, which poses a problem for many Member States?

WM: The problem certainly does not lie with the European regulation as such, for it has been created in a very professional way at short notice. In the eyes of the European Commission, reactivating the internal market is the driving force behind growth. There is no place for goldplating in this. In the wake of the crisis, all of the Member States started to look inward in order to see what exactly was the problem. This choice for stability was justified but also caused fragmentation. The option to create a Banking Union also should make it possible to ensure a level playing field.

RV: Indeed, there was a need for a number of additional rules aimed at restoring confidence. Bankers should be humble about this. Personally, I think that Europe makes a good effort to create a level playing field. They should continue to follow this path and the national authorities should refrain from goldplating, for goldplating essentially boils down to putting obstacles in the way of European unification.

What about the stress tests? Did they go far enough?

RV: I think that those tests have been carried out with much caution, thoroughness and responsibility. The situation now clearly differs from that of a few years ago: capital has been increased, balance sheets have been reduced and risks have been lowered.

WM: Anyhow, this was the most severe test ever. It has enabled the European Banking Authority to prove its credibility and the banking sector to show that its outlooks are all together positive. In my opinion, this was essentially important. If one wants to start up a Banking Union consisting of 28 countries, one must make sure that all is clean right from the beginning.

May we say that Europe is gradually evolving into a two-speed area? The EU area versus the non-EU area, North versus South and now we have SSM (Single Supervisory Mechanism) versus non-SSM?

WM: The EU as a whole covers an internal market. Great-Britain has its own area and puts a strong emphasis on the role of London as a financial centre. As long as the EU puts its efforts in maintaining the internal market, Great-Britain will stick closely to the Eurozone, because of the high economic importance it represents. As for the difference between North and South: the earning capacity of a number of countries is the major concern of the Eurozone and this is a problem one will have to deal with in the future.

Another question for the future: are crowdfunding and credit unions threatening financing offered by the banks?

RV: I think one should see this as an opportunity for developing new services, partnerships and ideas rather than as a threat. We should do our utmost to provide optimal access to financing.
A comparison with the United States shows that fragmentation is much bigger here. Anything which can stimulate growth, is a positive element. The bigger the cake, the better for all of us.

WM: Initiatives such as crowdfunding or credit unions are never bad. It may still be small, but it is proof of entrepreneurship.

Can the success of those initiatives be seen as an illustration of an excessive dependence on financing offered by the banks?

WM: Let us compare with the United States: financing offered by banks has always been fast, simple and cheap in Belgium. What are the advantages of calling upon the capital market for a
medium-sized company? This is an expensive, time-consuming and uncertain way of working. Then there is also the difference between the individual pension building up in the United States, where there are far more people who have to make a life-long investment in order to ensure their pension, and our collective pension systems in which there is less room for private contribution.

RV: In my opinion, things are complementary, so one can say it is one thing as well as the other. Aternative systems will crop up, but they will exist along with the bank’s offer and that is a positive element.

Do you see a future for the banking sector as a kind of intermediary or risk analyst?

RV: Why not? Our sector can provide guidance and counseling. Some of the institutional investors are willing to invest long-term funds as of now, but they call upon the banks, because they lack sufficient capacity for making an analysis. So, one cannot say this is something completely new.

WM: Up to now, crowdfunding has been very successful in that it has been used for creating products which are fun and hip, such as apps or gadgets. For the moment, the amounts are still limited and the investors are dedicated. However, an accident may be just around the corner. Some day, someone may say: “Right, I have gathered two million EUR. Will I start developing this product or get off to the Bahamas?”

RV: So, there is a need for counseling. Try to put yourself in a private person’s place. If he puts his money on a savings account, he will look for the interest and be sure that he will get his money back. If he opts for investing – and by this I mean ordinary investment products, not even  crowdfunding – he must radically change his mind. The self-directed customers who are the talk of the town, the people who try to find things out for themselves, are still a minority group.

New competitors such as Apple Pay, Google Wallet, Amazon… are also coming up

RV: The world is changing incredibly fast, so banks have to adapt. If you just stay and sit where you are, you may be in for some big trouble. We have the advantage of having our customers. However, one should be aware of the fact that they do not dream of banking when they wake up in the morning. They dream about working on their project or about trying to achieve something. The financial aspect is inevitable, but only that. The financial sector has always invested in new projects and partnerships, with electronic payments, mobile payment systems or micro-financing as a result.

WM: At the most important moments in life, one wants truly professional counseling, not just some advice or other. Maybe we should make customers aware again of the value of this counseling. People expect four bank experts to come to their home in the evening in order to make a full analysis of their situation and to provide them, two weeks later, with a plan spanning a period of 30 years, at no cost at all. That does not make sense.

Over to Brussels. What can we do against London-, Hong Kong- and Frankfurt-style competitors?

RV: The government’s declaration clearly specifies that one wants to keep Brussels as a financial centre and even make it grow. This offers opportunities and possibilities. There is a lot of innovation in Belgium, we often serve as a (technological) test market. These things must be turned into assets.

WM: What is most important, is that the public authorities, the sector and the supervisors defend the same position when it comes to their interests. This the only way to create a positive climate for establishing a business and ensure a sound development of some niches.

RV: We surely must take the hand given by the public authorities. I hope a forum will be started up as soon as possible where, together with the public authorities, we can think about potential assets. This will allow us to boost the financial sector’s image and to stimulate growth.

Finally: do you have any mutual suggestions as for your new function?

WM: These last few years, I have had the occasion to admire the speed and efficiency with which Febelfin has managed to successfully adapt to the changing circumstances, as well as its strong communication, such as the YouTube videos for instance. This shows that Febelfin is not afraid of taking creative risks. I hope you will keep up this mentality and even develop it further.

RV: In recent years, the discussion often was about regulation. It is up to banks now to regain customer confidence. I would like to ask you to help us in trying to achieve this within the framework of your function and to restore direct contact with the population as much as possible.


Moderator: Thomas Van Rompuy en author: Frederic Petitjean