Let's pray. Father, we submit this time into your hands now as we enter this session. We learn about and study about your holiness, what speak to us, reveal to us.  I'll continue to pour out your wisdom over as I pray. Jesus' name, amen. Good morning and thanks for joining again. Good to see you after two weeks of break. Christian leaders conference and last week happens to be the Republic Day National Holiday. So we missed four lectures. That's okay. That's fine. But I hope you all are doing well. I'd like to recap what was covered in the first week of Jan, second week of Jan at least, from chapter one. And we'll move into chapter two today. Can you hear me? Yes, we need to keep on speaker. All right, chapter one. So this whole section, right? We are in chapter, it has various sections where we talk about the holiness of God itself, right? Just Holy God. We looked at various different things in chapter one. From the revelation of a Holy God to understanding what holiness means and how he is set apart. There is no one like him, unlike him. And his nature is reproduced in us. We saw that in first Peter chapter one was starting to 16. And we paused and we looked at what holiness is. What does it mean? It simply means absolute sinlessness, absolute purity, right? Absolute truth, absolute faithfulness and justice and love and absolute goodness, sacred perfection, Godlikeness. That means there is, you don't need to argue or we don't need to have a debate when we use the objective, you know, saying absolute. If you're absolutely wrong. I mean, in court cases they will argue about it, they will debate about it. One person has to prove the other person right or wrong. But when we say God is holy, that means we are saying he's absolute. We don't need to have any debate about it, right? He's absolute. And, you know, as much as I stated this by, you know, when we started this course that we can try and explain, use words like set apart, use words like there is no one like him. We can understand it only to a certain limit, to a certain level, I should say, right? But the idea, or we have not completely been exposed to the holiness of God. Let's face the fact, okay? We have not completely been exposed to the person of his holiness, like who he is. Like, you know, we say that he is set apart, absolutely. We say that there is no one like him. You know, those English words make some sense, but yes, there is no one like him. We can't do justice. No words can do justice to describe who he is and his holiness. It's absolutely foreign to us. It's alien, you know, into our understanding. So in all of this that we are studying, I mentioned that I absolutely love this topic. And I was so happy when Pastor added this course, you know, on this topic of holiness. Yeah, I don't think there are a lot of colleges where you have a course, you know, just set apart. Just for the topic of holiness, right? But that's what it is.  You help me understand this. You help me understand this, right? I can explain, I can try and explain, you know, and study together, learn together. But as much as I can explain this topic, it is the spirit of the living God who searches the deeper parts of God and reveals it to us. Only he can do that, right? And so let this be your prayer. Okay, encounter me with your holiness, you know. And for the longest time, my prayer has been to see what Isaiah saw, what Ezekiel saw, you know, what John saw. So what, you know, just imagine being in the very presence, the rawness of who he is, right?  Yeah, is that okay? Yeah, so, you know, since the Garden of Eden, where in the Garden, man walked hand in hand with God, right? In the cool of the Garden, they could literally encounter and face the manifest presence of his glory and which was lost. And then, which we saw in the life of Jesus Christ, right? Jesus was the manifest of the Son of God, right? Jesus himself, in John 14 says, it is better that I go away. Jesus, the Son of the Living God, tells his disciples, it is better that I go away so that I can send a comforter. And if Jesus is saying that it's better for him to go away so that he can send someone, that someone has to be, you know, is very precious and value, right? And that is the Holy Spirit, what Jesus is talking about. And it is him who will reveal things to us. So yeah, we saw that he is God is absolute when we say that he is holy, right? And we see that in his holiness, God's beauty is his holiness. In Exodus 28 verse 2, we see that you shall make holy garments for Aaron, your brother, for glory and for beauty, right? And in Psalm 29 verse 2 and Psalm 96 verse 9, we see that worship the Lord in the beauty of his holiness. The beauty of his holiness. Okay, so again, I'm just taking time to recap this because it's been two weeks since we've gone through this, you know, content. So I hope you don't mind that. He is the most holy. Worship him in the beauty of his holiness. The world does not consider holiness to be something attractive or beautiful. That's why we, you know, we make fun of those who are holy as holy joke. Hey, he's one holy joke.  I mean, it's been there through the ages. No, it was made fun of when he was right. But again, you see, the language is so foreign. It is not of this world. Isn't it? The beauty of his holiness. It's obvious not part of this world. That means in his kingdom, holiness is beautiful. When we say Jesus, you're beautiful. It's interesting. You're holy. I mean, song of song says that, you know, you are fairest of 10,000 to my soul. What does that mean fairest? That means it's so pure, so perfect, so flawless. And 10,000 was just the number that was available those days. So that means there is no one like him as holy as he is. Right.  There's the most holy place, isn't it? When do we use those words? The most ultimate. And the most beautiful or the most expensive bungalow. The most expensive watch. You get what I'm saying? We use those words for those materialistic things. He is the most handsome, the most richest person in the world. You know, the most expensive water bottle, most expensive watch, the most expensive. How is the most expensive car? Everybody's after the most, but in a very different way. Right. No one, no one follows up the words the most with holy. No one in this world follows up or uses the word holy after the most except when we use it for God. And it's because he is the most holy. Right. We look into that as we go on. So worship him in the beauty of his holiness. That means that there's beauty in his holiness and Exodus 15 verse 11 says, Who's like you, O Lord, among the gods?  It's a rhetorical question. There is no one like him. No one is holy like the Lord for there is none besides you, nor is there any rock like our God. Let me just see if I can share the screen for this moment. Some of some people have tried to describe or give definition. Can you see it? Okay, so a pastor called Sam Storms, he writes, The holiness of God only secondary refers to his moral purity, his righteousness of character. It primarily points to his infinite otherness. That word otherness is very important. It's infinite otherness. That means it's alien. It's foreign. It's something that we can't understand or grasp or fathom. Okay, it's very important. I'm going to go through those lines one more time. Please pay attention. The holiness of God only secondarily. That means secondarily refers to the moral purity. That means his sinlessness. But when we see he is holy, it is primarily pointing to his infinite otherness. So to say that God is holy is to say that he is transcendently separate. Holiness is not one attribute among many. It is not like grace or power or knowledge or wrath. Everything about God is holy. Each attribute partakes of divine holiness. So beautifully written, isn't it? That's Charles Spurgeon. In holiness, God is more clearly seen than in anything else. Blessed are the pure and hearts for Desha. In holiness, God is more clearly seen than in anything else. Just one more. Sinclair B. Ferguson. He says God's holiness means he is separate from sin. But holiness in God also means wholeness. God's wholeness is his Godness. Sorry, God's wholeness is his Godness. It is his being God and all that it means from him to be God. To meet God and holiness, therefore, is to be all together overwhelmed by the discovery that he is God and not man. So to meet God in his holiness, therefore, is to be all together overwhelmed. Notice that he is not saying to encounter him in his holiness is not to say something. Most of the response of God's, you know, those who encounter his holiness himself is that they fall face down. They are overwhelmed by his presence. Overwhelmed by the discovery that he is God and not man. Finally, holiness is the perfection of all God's other attributes. His power is holy power. His mercy is holy mercy. His wisdom is holy wisdom. It is his holiness more than any other attribute that makes him worthy of our praise. Hallelujah. And there are a lot more wonderful quotes by wonderful man and women of God out there. But again, these were some of the points that I put together many, many years ago, but it's coming in handy now. I'll share those quotes on the stream section. Okay. Are you all with me? Right. So in his goodness, he is holy. So that leads us to the next chapter. Chapter two. Holy, holy, holy. So everything about God is holy. He is Christ holy, holy to the third degree. His name is holy. He speaks in his holiness. He dwells in his holiness. So those are all the things that we're going to look at in this chapter. Is that he is holy, Christ holy. His name is holy.  Right. And when he speaks, he speaks in holiness. And where he dwells, he dwells in holiness. Right. And, and later we will see that those who draw near to him, Bible says James 4, 8, he will draw near to us. And how do we do that? He talks about that as well. So we look at all of that in this chapter. Okay. So the holy one, or the holy one, the most holy, we say, we emphasize on the H E. He is the one, the one and only, the one and only. Right. Most of the time I have had young people ask me questions like, how did you know that your wife was the one for you? You know, how did you know it's like the one, like, you get the point, right. So when God, in his context here, most of the time he's referred to as the holy one of Israel, the most holy. There's no one that transcends his holiness. Right. He, yeah, try and understand all of that. Okay. Isaiah 43 15 says, I am the Lord. Your holy one, the creator of Israel, your King. As I have 47 verse four, as your Redeemer, the Lord of hosts is his name, the holy one of Israel, the holy one of Israel. There's another book that I would encourage you to read, which is a book by A.W. Tozer from which the court is mentioned in the, it's called the Knowledge of the Holy. It's a very small book. I think it should be available in the library or I'll check if I have a PDF of it. And if I do, I'll share it with us. A.W. Tozer in the Knowledge of the Holy says, Holy is the way God is to be holy. He does not conform to a standard. He is that standard. Okay. He is absolutely holy with an infinite incomprehensible fullness of purity that is incapable of being other than it is because he is holy. His attributes are holy. That is whatever we think of as belonging to God must be thought of as holy. God is holy and he has made holiness the moral condition necessary to the health of his universe. Since temporary presence in the world only accents this. Whatever is holy is healthy. Evil is a moral sickness that must end ultimately in death. Okay. Very strong words, isn't it?  It's like a disease that must end ultimately in death. We can read those that quote like 10 times and more if you have to and every time we read we might get something out of it. Holy is the way of God to be holy. He does not conform to a standard. He is that standard done. We can talk about that for like a half an hour if you want to, but he is the standard. What is he saying is that he, when we talk about the holiness of God, it's not just the attributes. We're talking about the person of who he is. We're talking about the person of who he is. There was a very controversial statement that was made a few years ago, which I'm not going to make that online while recording it. But I'll see that because it might become controversial and then I will become very controversial. But then I'll say it offline. Okay. So sorry guys. I'm not going to say it online, but something has to do with holiness. But yeah. Okay. Let's move on. Christ's holy. It is interesting in scripture that both Isaiah in the Old Testament and John in the New Testament in their versions, in their visions of the throne room. Heard the worship of the angelic beings and heavenly creatures calling holy, holy, holy. We read this scripture again and let's read that one more time. Isaiah chapter six. In the year that King Uzziah died, I saw the Lord sitting on a throne high and lifted up and the train of his robe filled the temple. You all remember what fill means? Being filled is? When are you filled? Full. When you're overflowing, right? The train of his robe was filling and it was overflowing. That means prison continues from that. Above it stood Seraphim. Seraphim is plural. Each one had six wings. With two, he covered his face. With two, he covered his feet. And with two, he flew. And one cried to another and said, Holy, Holy, Holy is the Lord of hosts.  Seraphim means fire. So it means they are the burning ones. And yeah, so these angels are on fire. Imagine that. Imagine that. I want to be in the presence of God.  You know what? I don't mind. That's the way I have to die.  Isn't it? So I saw the Lord sitting on a throne. So we have the throne. Let's imagine the throne. He's high and lifted up. And above it stood Seraphim. So there's a throne and then there are Seraphims above. Very important to know where they are placed in the throne room. And one cried out to each other, Holy, Holy, Holy is the Lord of hosts.   But we know they're on fire. Revelation chapter four verse eight. Actually, let's read some more scriptures from Revelation chapter four. I hope you guys are doing fine online, alive, not bored. So Revelation chapter four from verse one onwards. After this, I looked and there before me was a door standing open in heaven. And the voice I had first heard speaking to me like a trumpet said, Come up here and I will show you what must take place after this. At once I was in the spirit and there before me was a throne in heaven with someone sitting on it. Okay, are you ready? Okay, verse three. And the one who sat there had the appearance of Jasper and Carnalian. Ooh, it's getting interesting. The one who sat there had the appearance of Jasper and Carnalian. A rainbow resembling an emerald encircled the throne. There's a rainbow around his throne, guys. But surrounding the throne were 24 other thrones and seated on them were 24 elders. They were dressed in white and had crowns of gold on their heads from the throne came flashes of lightning, rumbling and peals of thunder. Before the throne, seven lamps were blazing. These are the seven spirits of God. Also before the throne where there was what looked like a sea of glass, clear as crystal in the center around the throne. Okay, in the center around the throne were four living creatures and they were covered with eyes in front and in back. The first living creature was like a lion. The second was like an ox. The third had a face like a man. And the fourth was like a flying eagle. Each of the four living creatures had six wings and was covered with eyes all around. Even under his wings, day and night, they never stopped saying, Holy, Holy, Holy is the Lord God Almighty who was and is and is to come. John is writing day and night. They never stopped saying. Only God knows how long they've been saying for eternity, for a long time now. But just look at the vision. It's the words that I use by him. The one sitting on the throne in appearance was like Jasper and Carnalian around his throne that looked like a rainbow, like an emerald. Just imagine the colors and all the amazing things that's in his throne room.  And so in Isaiah 6, we saw the seraph above his throne. And then here we see the living creatures are around his throne. Are you all following? Yes, no, maybe. Francis. Francis is in the Third Heavens right now. First Heaven only. Okay. I want us to go to one more scripture. Let's go to Ezekiel chapter one, shall we? Ezekiel chapter one. Lord, please help us understand this. Okay. Are we there? Ezekiel one. Okay. I'll read from verse four. I looked and I saw a windstorm coming out of the north an immense cloud with flashing lightning and surrounded by brilliant light. The center of the fire looked like glowing metal and in the fire was what looked like four living creatures. In appearance, their form was that of a man, but each of them had four faces and four wings. Their legs were straight. Their feet were like those of a calf and gleamed like burnished bronze was it under their wings. On their four sides, they had the hands of a man. All four of them had faces and wings and their wings touched one another. Each one went straight ahead. They did not turn as they moved. Their faces looked like this. Each of the four had the face of a man and on the right side each had a face of a lion and on the left side the face of an ox and each also had a face of an eagle. Such were their faces. Their wings were spread out upward. Each had two wings, one touching the wing of another creature on either side and two wings covering his body. Each one went straight ahead. Wherever the spirit would go, they would go without turning as they went. The appearance of the living creatures was burning holes of fire or like torches. Fire moved back and forth among the creatures. It was bright and lightning flashed out of it. The creatures, last verse, okay, verse 14, the creatures sped back and forth. That means they went back and forth like flashes of lightning. Now they were not traveling at the speed of light because lightning is not quite as fast as the speed of light itself, but it's still fast. You've seen lightning, right? Slow motion. They went back and forth like flashes of lightning. They were pretty fast. Yeah, these are the cherubim. Again, you'll read more about them a little bit in chapter 10 in Ezekiel chapter 10, but okay, that's enough of that. The reason why I want us to read the scriptures that we've already read and we are familiar with is not to take them for granted and just to reread them and imagine, hey, this is where God dwells. Where he dwells right now, in this throne room is like no other, right? Surrounded by these living creatures, the seraphims and the cherubims, eyes all around full on fire. I think the last class we imagined how a lion in heaven would sound if it rolled holy. Yeah. Yeah, this is God that you and I worship. This is the God that you and I worship. This is the God that made you and me, that knit you and me together in the mother's world. This is the God who called us by name before he laid the foundations of the earth. Isn't that beautiful? What an honor. I think we just ought to pause and just be at the wonder of this God that we worship. His holiness is His otherness. He's transcendent. There is no other being like him. And so when we read all of this scripture, right, and when you see the worship that is happening in heaven in his throne room, we need to pause and ask ourselves how much of our worship towards God is undergirded with this truth and this revelation. We need to ask ourselves this question. How much of your worship towards God is undergirded with the recognition and the revelation or the understanding of this holiness? Wait, are you all with me? Okay, we move on to the next section. His holy name, Psalm 30 verse 4, says, Sing praise to the Lord, use saints of His and give thanks at the remembrance of His holy name. Blessed the Lord, O my soul, all that is within me, bless His holy name. Psalm 105 verse 3, glory in His holy name. You all remember the word halal, right? To shine, to boast, to rave. Glory and shout. Rejoice in His holy name. Let the hearts of those, let the hearts of those rejoice who seek the Lord. Psalm 106 verse 47, some more scriptures, save us, O Lord, our God, and gather us from among the Gentiles. To give thanks to your holy name, to triumph in your praise. Matthew 6, 9, in this manner, therefore pray, our Father in heaven, hallowed be your name, hallowed. It means to be held holy or pure or consecrated. Jesus teaches His disciples to pray like this because in all the scriptures that we've just read, that's just from Psalms, which is in the Old Testament. We know what is Old Testament, but for them they do not have Old Testament, New Testament. Jesus knew to teach them about the holiness of His name. Our Father who art in heaven, hallowed be your name. We glorify that. We declare your name as holy. That's the greeting, right? And I've mentioned this in the last class, that we mistake the second half of this prayer also as greeting. That is, our Father who art in heaven, hallowed be your name, your kingdom come, your will be done. We think it's like one big continuation when we say it. Our Father who art in heaven, that's an address, hallowed be your name. Yeah, hallowed be your name. And then the next part is a petition. It's a petition, let your kingdom come, Lord, that your will be done. So the first half is recognizing who He is, addressing the King, our Father, who art in heaven, hallowed be your name. We glorify your name. We honor your holy name. So now let your kingdom come. His kingdom will not come where His name is not hallowed, right? And then the next section we'll see that where He dwells is holy, right? Where He lives, it is holy. That means He will not enter a place or He will not dwell in a place where His name is not hallowed or treated with reverence. Is there any other name of any other God that is used as a cuss word or as a bad word, like the name of Jesus is used? Enemy knows that. Enemy knows His name is high above every other name and that His name is holy. The devil knows that. That's why you know when, I'm sure you've heard people or at least you've seen in movies from the West when something goes wrong, when they want to abuse someone, what did they say? Jesus, isn't it? Yes or no? It's like a cuss word. They say the name of Jesus and they say, what is wrong with you? Jesus, what is wrong with you? Are you with me? What will you do if I take your father's name in vain and used it as a cuss word? That they won't be alive is what Francis said. Do we have that same passion for His name? Do we have that same zeal for His name? I will not watch and stand by and say and see the name of my Lord being tarnished. All we have to do is honour His name, rather His name. He knows how to take care of everything else. Okay, you know what? We'll pause here because this is a quite a big section I don't want to spoil it. So we'll pause, we'll take a break and we'll come to the next class. Thank you.


Russia prepares for long-term standoff in Baltic, Lithuanian military intelligence warns. Russia's military is preparing for a protracted standoff with NATO member states in the Baltic Sea region as the Kremlin expands military capability westward, Lithuania's spy agencies said. It is noted that President Vladimir Putin's military is increasingly using air, naval and nuclear forces to project Russian potential in the Baltic, according to a joint report by the Baltic nation's military and domestic intelligence agencies. The development is part of a major realignment of Russia's armed forces in its western regions. The Lithuanian military intelligence assesses that Russia will have sufficient resources to sustain its war against Ukraine at the current intensity for at least the next two years. According to Lithuanian intelligence, the aggressor country's capability is sustained by high oil prices, invasion of international sanctions and state investments. In a joint report by the Counterintelligence Department of the State Security and Military Intelligence and Security Service of the Ministry of National Defence of Lithuania, it is noted that Russia has reformed and strengthened its army, which was severely battered during the fighting in Ukraine in 2023, and is on the path to expanding its military potential along its border with NATO countries. Moscow is able to evaluate the lessons learned and improve its combat effectiveness, the Lithuanian agencies added. Russia has world's most diverse nuclear arsenal, U.S. General. Russia poses a serious challenge to America's military dominance, Air Force General Antony Cotton, who heads the U.S. Strategic Command said. Moscow already possesses a nuclear arsenal that exceeds Washington's and is actively modernizing it. He told the U.S. Senate's Armed Forces Committee in a prepared statement. Together with China, Russia is swiftly improving its position against the U.S. and its allies in multiple domains. The general warned adding that the pace of these changes is increasing and is now much faster than that seen just a few years ago. He pointed to a recent statement from Russian President Vladimir Putin, who said in early February that the Russian strategic and nuclear forces had been almost completely modernized. The naval component of the nation's nuclear deterrence triad had been almost 100% upgraded, he said. Russia is currently in possession of the largest and most diverse nuclear arsenal of any nation. Cotton said, specifically pointing to Moscow's Samat intercontinental ballistic missiles and brand new submarines also capable of carrying nuclear weapons. According to the U.S. General, Moscow is also expanding and modernizing its nuclear options beyond the classic nuclear triad. In particular, he drew Senators' attention to the Kinzel and Siakon hypersonic missiles, both of which he claimed could carry nuclear payloads. The U.S. strategic forces are currently operating in the face of challenges, unlike anything America has ever encountered. Cotton warned adding that the combined potentials of Russia and China, together with North Korea's and Iran's nuclear ambitions, add new layers of complexity to our strategic calculus. He urged Senators to facilitate a rapid upgrade of the U.S.'s own arsenal, adding that it is absolutely critical we continue at speed with the modernization of our nuclear triad. Ukrainian Air Force reveals remaining A-50 aircraft in Russia. In Russia, fewer than eight long-range A-50 radar detection aircraft remain. One such aircraft was destroyed February 23 by the Ukrainian Defence Forces, reports Air Force spokesperson Yuri Inat during a televised marathon. The successes we have today, this extended arm, the ability to reach the enemy where they absolutely don't expect it, speak to the fact that the adversary will have fewer capabilities in this direction after losing the A-50. The spokesperson noted that the destroyed aircraft had been modernized. As explained by Inat, the A-50 is essentially a radar that can observe and scan, detecting all aerial targets within a radius of 600 km and identifying electronic warfare systems. We need to look at the intelligence data. The head of the main intelligence directorate, Kirill Obudanov, said there were eight aircraft before this. Not all of them were operational, and not all of them were modernized. So there were only a few of them left, Inat added. On February 23, Defence Forces of Ukraine reported that a Russian A-50 aircraft was shot down over the Sea of Azov. This is the second A-50 that the Armed Forces of Ukraine have destroyed since the beginning of the war. According to the main intelligence directorate, the A-50U is a new, modernized version of the aircraft. The cost of the destroyed aircraft is $350 million. The Russians used such an Airborne Command Post for long-range radar detection, control and guidance for strikes against Ukraine with missiles from strategic aviation.


to get, but you can get better off.


my top five most incredible mountain ultras. Transvolcania in La Palma it's 76 kilometers four and a half thousand meters of vertical gain up the side of an ancient volcano passing by some active volcanoes. CCC in Chamonix France 100 kilometers 6,000 meters of elevation gain round Mont Blanc the highest mountain in Western Europe. Tenerife Blue Trail on the Spanish island of Tenerife. 6,000 meters of elevation gain 100 kilometers all the way from the beach to the top of the highest mountain in Spain and then back down to the beach again. Transgrancania in Gran Canaria 130 kilometers long 7,000 meters of vertical gain. This run has some of the most stunning views Val d'Aran by UTMB in the Pyrenees in Spain 10,000 meters of elevation gain 161 kilometers over the most technical terrain you will ever find.


I think we'll let people sit down. Good morning, my name is Alessandro Merli. I'm the Frankfurt correspondent of Il sole 24th order, the Italian Financial Daily, and I'm here to coordinate the next session, which will be on the European Banking Union, a subject that was already touched upon in the workshops yesterday. I would like, first of all, to thank the organizer for inviting us to discuss this topic, and I must say that the timing was impeccable. Our meeting here is sandwiched right in between the latest eco-fin meeting, which discussed the subject, and the meeting of another eco-fin and the European Council summit, which will happen at the end of next week, which is supposed to take some decisions on this. So congratulations to the organizer for the timing. Why are we discussing the Banking Union and why now? I had an interview with the President of the Bundesbank last week, Jens Weidmann, and he told me, he was reminding me that at the very beginning of the monetary union, Wim Doisenberg, the first head of the European Central Banks, used to underline the importance of heavy banking union, and this was 12 or 13 years ago, but we've come to discuss this now. Why? Because after the crisis, I guess it was apparent that a fragmented banking system and this loop between the sovereign debt and the state of health of the banks could make the monetary union itself unsustainable. To discuss this with us today, we have a very distinguished panel with different skills. On my immediate left is Benoit Coray, he's a member of the Executive Board of the European Central Bank now for about two years. He has had a long career at the French Treasury, including working on G8 and G20s, and he has something that's, I think, almost unique among policy makers in Europe in the sense that he has a background in Japanese studies which should serve him well in the current crisis, which many people think it's very similar to the one that Japan experienced in the past two decades. On his left is Philip Hildebrand, he's now the vice chairman of BlackRock, one of the biggest asset managers in the world. He was also the chairman of the Swiss National Bank and in this capacity, he had to deal with in a country that has very big banks, actually banks that are in relative terms, maybe almost too big for the economy, was also very much involved in international regulation efforts after the global crisis and the Financial Stability Board. He also has previous experience as a hedge fund manager. On his left is Konstantin von Horstereich, he's the chairman of the Management Board of HSH North Bank, since 2012 and previously with the same institution, he was chief risk officer and chief financial officer, but he also has a long career in private bank, Deutsche Bank in various position. I would like to skip introductory statements and start possibly with Mr. Curry, which will sort of give us a report of the state of the banking union after the recent developments in Brussels and maybe looking forward to the next European Council. Thank you, Alessandro, and good morning to all of you. I have to say that you're very brave to be here with this sunny weather outside, so it's our duty to do our best to keep you entertained and awake. I think your description, Alessandro, of why the banking union is needed was really up to the point. We need the banking union to disconnect the fate of European bonds from the fate of their governments, and we've seen how this feedback loop was really at the heart of the other crisis. But for that, we need two things. We need supervisors to have a European mandate instead of a national mandate, and that's about the supervisory mechanism, and that's why we have a single supervisory mechanism. We also need European banks when they die, when they are wound up to be in the hands of a European resolution authority, and that's also why we need a single resolution mechanism. So we need both, actually, if we want to disconnect banks and servants. And the former Bank of England governor, Mervyn King, used to say, banks are global in life, but they are national in death, meaning that when they die, this is about taxpayers' money and it's national taxpayers' money. So we want to make sure that banks are global in life or European in life or whatever they decide, that they are business choice, but that they are European in death, not any more national in death, and that's very important. So where do we stand? We have a single supervisory mechanism. It's now coming. We have a law, a European law. We have a president of the ECB supervisory board, Madame Nuit, who's been confirmed by the European Parliament. We've done a lot of work already at the ECB to set it up. We've started hiring people, looking for new premises, rearing the IT, et cetera. I mean, we're not going to talk about that this morning, I guess, but it is of course very important and it's about 1,000 people that will be hired in Frankfurt as part of this new mechanism. So that's an enormous change for the ECB as an institution and we want to get it right also in terms of culture. We want this new institution to have a true European culture. We don't want this new supervisory board to be just a committee of national supervisors because that would be a failure. We want them to be working in the European spirit as the governing council of the ECB works in the European spirit. So that's the first challenge. But it is there, it is coming and the priority of the new mechanism next year will be to undertake a comprehensive assessment of the balance sheet of European banks. And this will be for those banks that will be directly supervised by the ECB, around 130 banks directly supervised by the ECB. And there will be first a risk assessment, second an asset quality review and third a stress test which will be more generally coordinated by the European Banking Authority because it will be for the whole of the EU. So these are started, it is no material. So really 2013 is a year where the single supervisory mechanism has stopped being a concept and has really moved into reality. Now we need a single resolution mechanism, as I said. It's really an ongoing discussion among ministers and as you as you recall, it's taking place now. There have been several days and nights of discussions this week in Brussels and in other places next week also. And what we would like to see at the ECB is a true European mechanism with a resolution board having the authority to close banks and having the ability to close banks in a swift way. And let's not forget that this is about crisis management. So they have to be efficient, they have to be entrusted to do it, but they also have to be able to do it in a very quick, very efficient manner. So we need a governance mechanism that is lean, that makes it possible to take prompt decisions and we need a single resolution fund because that's the only way to disconnect the liabilities of banks from the liabilities of sovereigns. So we need a single resolution fund that should be funded by the industry, by your levy on the industry. But in case, in particular, initially, in case it would be too small, we need a backstop that would be provided by the European stability mechanism. And we're not yet there. We're not yet there. So that's the challenge of the few next days would be for European ministers to agree on this comprehensive mechanism. I'm very confident that we'll come there. Will it be tomorrow, the day after tomorrow, or will it take a few more weeks? I don't know. But I very much hope that this will be settled next week. Thank you. Philippe, maybe you can give us the investor's view. One thing that the president of the ECB, Mario Draghi, said that the outset of these exercises of reviewing the bank's balance sheet is that the success of this comprehensive assessment of the Eurozone banks will be determined by the willingness of investors to actually put money into the European banking sector. In the meantime, there is some movement in the market. Bank shares have gone up. I don't know if it's a function of more confidence of people that this assessment will prove right. What is your view on it? The most important element, and this is very positive, is that the capital markets are open again for bank capital. This would not have been the case only a few months ago, frankly. If you even look at this week, we've had this past week, we've had another capital issuance. We've seen a number of convertible bond issuance cocos that have been put out successfully. We've had at least six or seven banks that have been able to tap the markets in the last couple of months. I think it is clear that the markets are open. This is, of course, partly a reflection of the ongoing search for yield of the very low interest rate environment as a result of QE. It's hard to distinguish exactly how much is linked to confidence in the process towards a banking union and how much is a much broader phenomenon. There's no question that QE, not just in the U.S., but of course in the U.K. and even in Japan, that this has helped pushing investors into risky assets. That was the whole point of unconventional monetary policy. And that is now feeding also through some of the bank stocks in Europe. But I think independently of that, it seems to me there is something separate going on, namely a reassessment of the risks in the European banking system. And my conviction is that some of this has to do with the process that has been put into place, both long term as well as short term, towards the banking union. I think the progress that seems to have been made on the resolution fund is another very important step. I agree with Beno, I think that's crucial. Moving forward, the credibility, fact that given that the ECB is behind this, Mario Draghi with his personal credibility, I think is helping slowly to convince markets that this is for real. And that at some point by the end of next year or early 2015, the European banking system will be broadly speaking in a reasonably robust position. So what you're beginning to see in anticipation of that is the movement that I've mentioned in the capital markets. The key is to keep this process credible moving forward. In many ways it's a confidence game. The longer it lasts, the stronger the conviction will grow. And the more we will end up at the end of the process in a situation where one day we'll wake up and by and large people will say, you know what, the European system has stabilized. This is of course, it's a very different process unfortunately than what we had in the US where it virtually happened overnight at the time of the stress tests that Tim Geithner put into place in March 2009. It would be very nice if we had had something similar and if it weren't five years later and we're still talking about the robustness of the banking system. But we are where we are. And I am actually quite optimistic that provided all the parties keep on track now moving forward that this gradual confidence game is gonna begin to work. I was just in Greece on Friday and I can tell you even in Greece and a lot of people don't realize this, there are firm bids now from hedge funds from institutional investors that were put into the banking stabilization fund for stakes that they would like to take these investors in certainly at least two of the remaining four or five banks in Greece. So I think there is fragile good news everywhere. The key now is to continue to make progress and not have setbacks and hopefully continue to operate in a global kind of rather positive market environment. Thank you, Mr. von Osterreich, if I can turn to you to have a banker's view now. Of course, people start about, talk about the start of this assessment of your balance sheet. So at least of the 128 banks it will be supervised directly by the ECB. People don't realize that this work is actually already started. The ECB has already met you in several meetings in Frankfurt. I think you were there with the other German banks at one of the three meetings. You've also received a questionnaire from the ECB which a lot of your colleagues tell me it's quite complicated and they are taking a lot of time to fill it. What are your first impressions on how this exercise has started and if it will respond to expectations? Let me say the following. I ran a bank which went substantially off rail after I failed IPO. So the regulators are all over us already. So we know our figures. That means we can comply which we were asked for by the ECB. And that kind of tells you what it means. It depends on how prepared you are. Those institutions who during the crisis have learned their books and have worked out how they have to go forward, have been recapitalized sufficiently and have strong balance sheets. I mean strong common equity code, a sustainable leverage. Those guys can be pretty sure that they will sail through successfully. Obviously that I also have to admit we look a bit like a rabbit snake how that all will be happening. What is very important for us? Yes, many important milestones on the way to the banking unit have been taken but implementation execution now is the name of the game and that's where we are looking very much forward to that we get a crisp and punchy and rows of engagements and we know that our obligations in other words rows and the responsibilities have to be very clear and what we're afraid of that there will be lengthy and maybe not that precise. We're very much hoping forward, looking forward to get a much better regime, harmonized and fair to everybody and that will make it for us much more predictable how to run a bank. So overall we're very positive where the situation is concerned with obviously reservations which is clear and I guess the time of morning is very much over and I would say we are now getting just on with it. Mr. Corre, you've alluded a bit to the ECB preparation for this, it's a huge logistical exercise for you also because you are only now stuffing this new function of and this I guess will take time it's not easy to hire a thousand people with this very specific competence so maybe you can tell us a little bit more on the ECB preparation but also on the relationship between yourselves and the national authorities that have supervised the banks until now because of course you will rely on them for many functions but at the same time these are the same national supervisory authorities which in many cases or in certain cases fail to either spot the problems or correct them or were subject to pressure at the national level for maybe overlooking them or not intervening effectively. Well starting from your second question I wouldn't frame the discussion in terms of failing or errors being made but more in terms of harmonization and consistency. One of the major challenges that this new mechanism will face is that the starting point is 18 different supervisory culture, 18 different supervisory handbooks in the participating countries and really the asset quality review and more broadly the comprehensive assessment is the occasion to bring them together so it not only serves a stabilization purpose as Philippe described it serves a macroeconomic purpose in a sense which is to recreate trust in the European banking system but it also serves another purpose which is to kick start this new supervisory culture and to bring together all the assumptions taken by national supervisors. So if you take rates of recovery of bad loans forbearance of non-performing loans all these kind of technical issues that are very important when it comes to the numbers they will be harmonized and they will be harmonized in a way where there will be several checks because the numbers will be produced by the banks obviously then they will be checked by the national supervisor then it will be all brought to Frankfurt and there will be cross checks among national supervisors so there will be a second pair of eyes which will be the eyes of the other supervisors bringing their own supervisory culture and asking questions and that's entirely new and then there will be a third pair of eyes and this will be the independent auditor that we also bring in to check some aspects so as an auditing process it will be totally different from what has been done previously to check the quality of the assets. Coming to your first question yes we will hire 1,000 people it's all open vacancies it's all on the ECB website so it's all public we have head-enters we have panels so it is very transparent, very public we are starting from the top so we'll soon hire the director-general top management of the new authority and then we'll hire the rest we have amazingly good applications from the private sector at very high level also obviously coming from national supervisors because they want to be on board national supervisors want to be fully on board they want to send us their best people so there is a great sense of ownership of this new mechanism and that's the good news that they want it to work they want it to be a success you must pay good salaries because when I wrote a story on this hiring spree of the European central banks some time ago talking to your director of human resources I got literally hundreds of emails of people asking me how they should apply for this so the conditions must be good I guess Philip one of the big questions about the new role of the ECB will be that they will have to do at the same time their monetary policy role which they've fulfilled so far and on the other hand supervision which at the very beginning was the side of the monetary union was decided they should be kept separate and people think that maybe this will test the credibility of the ECB in terms of running its monetary policy of course you've done it at the Swiss national bank and so how do you think this conflict especially times of crisis can be solved let me first say on the staff problem there are lots of private bankers and investment bankers out there who I'm sure would love to work in a stable interesting environment but also I have no doubt that you'll be successful and by the way from a market perspective I actually think it's very important that you don't just hire from the national supervisors I mean part of this confidence game that I described is for right or wrong and some of this I'm sure is not entirely fair but the markets by and large believe that perhaps the key element of banking union is this transfer of authority from the national supervisors to the ECB and this has to do with many different things but by and large it has to do with the conviction that it is very easy for national regulators to become captured by politics at the national level and that by moving this to the most credible institution in Europe you can short circuit some of that and I have to say my own experience and I see some of my colleagues at the time in the Basel III reform process under the leadership of Jean-Claude Trichet was certainly that this was and is presumably a big problem that a lot of the political influence came via the national regulators and so I do think this movement of authority to the ECB is very, very important so hopefully the single supervisor mechanism will be much more than simply an aggregation of the national supervisors at the European level I think that's a very important piece of this confidence game to convince markets to capital markets that you're creating something new which is distinct and different from simply aggregating the supervisors at the national level now on your question this is obviously a problem I think it's a problem that will not be solved in any clean way one of the men I admired most in our policy circles who sadly no longer with us to Mazaparoscopa always argued for a long time that you can't have the world as clean and as simple as we would like it to be in a perfect theoretical world it would of course be very nice if you could separate entirely regulatory supervisory functions from monetary policy functions that would keep it cleaner it would presumably keep monetary policy free air of political influence that's the sort of traditional term in view which doesn't like this mingling up of monetary policy with other things but I think as we've seen I mean to me the main lesson we've learned in the crisis that the world is not simple and whenever you hit a crisis moment these two things intermingle and frankly as we've also seen very clearly even fiscal policy becomes intermingled at some point with monetary policy to some extent so the notion that we can sort of solve this in a clean perfect way anytime soon seems to me to be unrealistic we have to accept that this is a problem that we have to do the best we can take the recent example in the UK the funding for lending scheme now in theory any one of the three committees certainly any one of the three committees of the Bank of England was affected by the scheme it was never quite clear who really had authority over it in the end when it was ended it wasn't ended by any one of the three committees but it was ended in an accord between the governor Mark Carney and the chancellor George Osborne so suddenly none of the three committees seemed to have been responsible for it and I think that shows that even when you try to organize yourself as well as you can the reality is these things are complicated and to me I don't think this is a first order problem right now in Europe I think the most important thing is now to continue this confidence game to make sure the capital markets reopen for the banks that we do get to the banks to a robust place because Europe cannot grow significantly above potential as long as the credit channel is clogged and as long as credit is contracting that's simply not possible 75% of the European economy is funded by the banking system if we want to see the kind of growth rates that are gonna generate employment that will bring back stability to the eurozone we have to have the banking channel the credit channel reopen and that will only happen if the market regains confidence we will then have to worry about these things and I think the best answer in my experience is to be as transparent as possible and explain relentlessly what is monetary policy and what is stabilization or regulatory policy liquidity policy and to the extent that you can try to separate it I think the ECB has done a great job by separating the standard monetary policy approach through interest rates and the liquidity approach through the liquidity measures that it has taken most recently on the LTRO I think that's something the Fed didn't quite do as nicely and some of the reasons around the confusion in terms of QE and the end of QE have to do with not having separated these things as cleanly as the ECB but the reality is even in the case of the ECB and you see it right now with the discussion around the LTRO some overlap is going to be inevitable and the best you can do is to be transparent and clear and explain as much as you can I think Benoit Courier has a comment on your comments No, I agree with Philippe that there is no clean way to do it and by the way, Thomas Opa-Douas-Ciopas whom you quoted also used to say that financial stability is in the DNA of central banks so we do monetary policy but financial stability is in our DNA and I think that's a good way to put it still I believe in separation for another reason which is accountability as the consequences of banking supervision are very different from the consequences of monetary policy if a bank is badly supervised this can lead to resolution resolution is it's about property rights it's about maybe at some point ultimately a taxpayer's money this has very different consequences so the banking supervisors should be accountable their own ways to parliaments and to the general public and that's why we'll have the supervisory board and this chair of the supervisory board who really will be the public figure of the ECB when it comes to banking supervision so next year if you want to discuss banking supervision please invite Madame Nui, don't invite me Mr. Bonoster, the position of the German banks especially smaller banks has been different from other groupings in the discussion running up to the single supervision some of the German banks and well you have no say in the matter because you've been included in the 128 that are going to be supervised directly by the ECB but a lot of others fought very hard and I think the German government supported them to keep out of the supervision of the ECB why do you think that is the case and was there a reason for it? Certainly we didn't have much of consultation that means we have a lot of small banks quite the savings banks alone are 418 and the core banks kind of the same size so there are a lot of small banks who are afraid of a complicated European regime and it is all in English and I guess that may be an issue elsewhere too so that's why they take their organizations to influence the government and hoping that they can stay out of it but I mean at the end of the day the rules are pretty clear so I mean nobody who has a size to be in can get out and even banks with smaller sizes are in for specific reasons and so I mean there is a level playing field I mean this was a situation in the running up because people were just afraid in very simple terms to answer that question I just follow up on one point I think we haven't touched on this yet there are two dimensions to this entire process one is to make sure that banks have sufficient capital so the uncertainties can be removed in the marketplace and they can start lending again the credit channel can reopen that's clearly going to be the key element from a sort of macroeconomic perspective but I think there is a second dimension to it and that's the sort of standardization of numbers of the way you look at balance sheets transparency ultimately and in the long term I think that's equally important and perhaps even more important from a sort of efficient capital markets perspective from a banking perspective and I think rightly seems to me from the very beginning if you look at the communication of the ECB around the single supervisory mechanism and the entire exercise the ECB has always emphasized rightly both of these dimensions and I think they're both very very important because one of the problems one of the reasons why we don't have a common banking market why we have so much fragmentation is because it is very difficult for an investor a global or European investor to actually compare investments in banks in Italy and Greece and Germany and Austria so hopefully one of the things that will come out of this is a much greater comparability and standardization of banks from an accounting from a balance sheet perspective now of course at the European level since the start of the crisis this exercise has been done twice already with a stress test of the in a different form of course but with a stress test run by the European Banking Authority so and they were not very successful certainly didn't restore the confidence of investors in the European banks and probably also in banks themselves we've seen banks who were tested and found healthy and then failed the next day not just in Greece but in several countries so this time is different everybody's saying or is it do you allow me to take one step back and just come back on the German perception because it is very very important and it's really at the heart of the of the political economy of the banking union so I think we this is something that should be clarified there is a fear in Germany in the German public that a banking union would be the first step towards mutualization of debt that this would be backdoor fiscal union in a sense and that's very much a perception in Germany what I would like to say here is that quite to the contrary a banking union is meant to make the financial system safer in all countries and so the single supervisory mechanism will have a name to avoid the kind of negative feedback loops through banks that we've seen in some countries and that ultimately led to a need for financial assistance so a good single supervision is a protection for taxpayers including for the German taxpayer that's very important to explain that on the stress test and AQR one very simple answer is that this stress test will be preceded by an asset quality review which hasn't been the case in the last in the previous EBA stress test and there is a paradox here that we've seen in some countries namely countries under an IMF and EU program or an EU financial assistance program they've been through this asset quality review and stress testing process so we know more or less what's going on there may be still surprises we don't know but we more or less know what's going on in all other countries including the large Eurozone countries there was no asset quality review so we don't know so really the difference here is is the asset quality review is this comprehensive and very strict auditing of the balance sheet of the banks and this is a major difference with the previous stress test so if there are any surprises we should expect them from Italy, Germany or France well we'll tell you when we have the numbers Mr. von Osterreich are you convinced by the argument of Mr. Corre that there will be no mutualization of of of losses or or not I think it should be noted I don't know if it's commonly known that Germany has actually spent more money on helping its banks after the crisis than even Spain in terms of in terms of percentage of GDP these are the according to the IMF figures Germany has actually spent in terms of GDP about twice as much as Spain has spent on its bank of course the Germans will say well it's our money we do what we like with it well obviously I subscribe to the central bank of you and it's occasional because we all fully agree that it is a very important part of our future of the banking industry and the future especially also for Germany so we are principally in full agreement and as you just said Germany that everything in order to stabilize the banking industry and I'm happy to report that actually the last aid was repaid last week so the software which is the agency which helped out the banks and has now no more debt outstanding to the system which means that we are on the whole very much on the right way now on the this exercise is supposed to last for about 12 months ECB will take several steps as you said they will look at the general risk of the banks and evaluate the balance sheets and the asset quality review and they will do the stress tests 12 months for markets is a very long time it can create a lot of uncertainty and it can create a lot of uncertainty for banks as well in terms of risk of short-term deleveraging so things maybe will get better in the longer term in the sense that we will have more stable and better supervised banking system but in the next 12 months is there a risk that there will be more deleveraging heightened volatility which in turn will worsen the credit crunch maybe hampering the recovery Mr. Courrette well it's true that 12 months is a long time for financial markets but financial markets are forward-looking so anything that that will happen over the next 12 months is already in their plans and a lot of what Philippe has described I mean money coming back into peripheral countries buying non-euro area investors buying bonds issued by banks including in southern European countries which we are seeing today which we've seen over the last weeks and months this is in anticipation of the of the banking union so if it starts now it's even better in a sense so they're not going to react in November 14 they are reacting they're taking decisions today and rightly so for this we are seeing already we will see a certain amount of I mean we have a deleveraging trend already in the European economy generally in the banking sector certainly and this will be accelerated by the banking union and by the asset quality review and stress test it's better that it's I mean the sooner the better the sooner the better because once it's done it will free up the capacity of banks to lend to the economy once banks have the ability to restructure their balance sheets to shed some portfolios of not very well performing loans to guys like Philippe or others that would be happy to buy them they will be happy to buy them if there is a price today in many places there is no price because there is too much uncertainty and that's precisely the purpose of the asset quality review to create trust around the price of these assets and then there will be a market then banks can rearrange their balance sheets and they can create room to lend to profitable projects in the economy so that really serves a positive purpose which is to to recreate space for banks to lend to the economy Mr. Voronzer, I quote your view on that will you all or is your institution deleveraging or what you hear from your peers do you see much deleveraging going on that may in the next 12 months worsen credit provision? Well I mean the larger banks are concerned right and they are all renewing this topic since a long time and they're working out very extensively so I don't see much of a fear there and for all other if you wish not core financial institutions are stepping in like the shadow banking system also insurance companies so there is compensation so as far as I can see there is no shortage of money supply where the industry is concerned obviously I should speak more for Germany than for other countries. Philip you've alluded to the US experience earlier I mean the US did it the reverse way than what the Europeans are doing now they first had the money there and then Mario Draghi once said just by magic the needs corresponding exactly to the money that was put there so everything worked out the Eurozone is still unclear about the backstop there are some proposals on the fund on the way fiscally they should be arranged that how do you see this ending will in the end even though they did the reverse process the Eurozone end up like the US or like Japan. Let me put it this way I think where we are today sadly it's taken a very long time to get to where we are today I keep reminding people we are about to start year six after the crisis which is quite extraordinary when you think about it so that's unfortunate and there are many things that I feel sad about how long they've taken in Europe and there's really no reason why they should have taken so long but you know that's history Europe as Tomaso Parascopo also often said is a very unique construct and often our American friends still have trouble understanding the complexity of the construct so certain things take a long time so we are where we are today frankly if we ended up in a Japanese situation that would be a sort of unforgivable mistake given where we are today so I think there's no reason to end up in a Japanese type of environment provided as I said that this show can be kept on the road so to speak and I do think that for this next year this entire banking union exercise is absolutely crucial because it will lay the foundation for growth to come back. The backstop issue is an issue in an ideal world again it would be perfect if we had a clearly committed you know European backstop that would enhance confidence in the entire process. I would simply say you know I'm not sure the money was really there in the U.S. at the time I mean that too to some extent was announced it was announced I think we would have a long discussion to see whether the money was really available and there but it was well done at the time here we have a slightly different situation on the other hand people overlook over and over again when you hear this backstop discussion there's still a fair amount of money left that has been committed that has been passed in the budgets that is available in the various stabilization funds Greece for instance has 11 billion dollars 11 billion euros in its stabilization fund that's there Spain it's even more than that a number of countries have capacity left into funds and obviously the big countries like Germany certainly has budget capacity if it were to become necessary and also has some funding left quite a bit in fact that is still earmarked for that so there is money in Europe it's not as clean as neat as it would be if we had a European backstop but there is some money left secondly you know one should not over dramatize the problem the even the wildly sort of pessimistic estimates the worst estimate I've seen of the capital shortfall is 200 billion euros so the ranges are somewhere between 30 and 200 billion euros let's say so let's take the sort of wildly pessimistic number that's floating out there I think it was put out by Pricewaterhouse or one of the one of the firm one of the big firms you know even that number represents 1.3% of the European collective banking balance sheet so let's not turn this into a story of sort of the entire banking system being insolvent in Europe now 200 billion euros would be a very bad number would be a very big number frankly I doubt that that's the right number but even if it were that number that's not beyond the fiscal capacity of the Eurozone if you look at the countries that still have capacity and if you look at the money that is already earmarked in the various stabilization funds in Europe over time of course part of this Europeanization of the banking system should be and hopefully will be at some point to have a European backstop there are elements of it today you have the ESM you now have significant progress from the way I read it last week on the bank resolution fund again that's something I don't think is fully priced in yet into the market if the leaders can deliver next weekend that's a very very important next step in this so-called mutualization of the banking system in the deeper integration of the Eurozone so would it be nice to have a big European backstop yes of course it would be but I don't think the fact that we don't have one that is sort of perfectly set up and clean does not mean that this problem is insurmountable I think Benoit Coré is something to add on that I also ask him to clarify one thing you've mentioned the vicious circle of the loop between sovereign sovereigns and banks and there's been some recent discussion about the way sovereign bonds in bank balance sheet should be treated not so much in the AQR but in the stress tests and I think there is a need for some clarity there so I'm happy to provide the clarity on that aspect no on the capital shortfall I mean I'm not commenting numbers obviously but there is sometimes a perception in the market that any capital shortfall that would arise from the asset quality review and stress test would have to be covered by governments this is no longer the case I mean the world has changed there will be a very clear waterfall of capital coverage banks should first raise capital in the market and a vast majority of European banks they can raise capital on the market so shareholders will not be happy that's life but they will raise capital in the market and then they can if there is any need for public money there will be bail-in of some categories of investors that's under the new competition guidelines so this is again money that will not come from the taxpayer so the taxpayer really is the last result is the last result contributor and as Philippe said there is a European backstop which is the ESM we did it in Spain it works it worked very well in Spain so it could be done if needed for other countries but as I said this is really the last result backstop and there is now a clear priority the Spanish actually needed less money and they used much less money than initially planned they used less than half of the money that was appropriated on sovereign exposure there is sometimes a confusion between the asset quality review and the stress test asset quality review is really an accounting exercise it's an audit that has to be done differently that's what we discussed differently from the past but it is a snapshot of the balance sheets and capital levels equity, quarter-run equity regulatory capital of the banks and as such it has to be done under current rules and the European rule is CRD4 this is the way the EU has chosen to transpose battle III battle III does not necessarily force a zero exposure on sovereigns that's not in battle III but it is in CRD4 so the ECB as supervisor will enforce Europe and law as it is we are not going to change Europe and law that's not the purpose of the exercise now of course there will be a stress test and the stress test it's about scenarios and the scenarios they have to apply to all items of the balance sheet of the banks including capital exposure so the stress test is really the right place to have that discussion now I thought I understood something about the crisis in European banks especially Spanish banks one day I opened a copy of El País and there was a picture of one of the chairman one of the cachas one of the saving banks that failed and he was the local bishop so I thought well something must be wrong here if the bishop is running the bank no wonder the bank is going to fail I'm saying this because we have this interstice of mixture of interaction of banking and politics in many European countries in my own country one of the most evident cases of failure in management of one bank which is Montede Pasquit de Siena which also happens to be the oldest bank in the world is because there was so much interference of local politics that eventually the bank was run very badly of course we had instances of that in Germany as well where many appointments are done on a political basis run on the base of competence so I wanted to ask Mr. von Osterreich if you feel that European supervision will put an end to it this mixture of banking and politics well that's a very difficult question to answer obviously we have to find an equilibrium between supervision, external guidance and how to run our business successfully currently obviously in the run-up to what's going to happen, the Balanchite assessment and the stress test there's an overburden of administrative work to be done for various parties so local regulators, the European regulators and obviously if you are a state-controlled bank then that is your own government who is highly interested in how things are going on so at the end of the day what we're looking forward is that we do have a clear cut a very precise regime that we can work successfully in this regime and I would like to repeat this here for me, for a policy forum is the most important point that this being sorted in a fashion good for the industry and that obviously would also help the industry at the end of the day to recover fully and to be what it was in the past thank you we're running out of the spare time that we also had by starting a little bit later one possibly one last question for the three of you, where do you see the European banking industry and its supervisory and regulatory side say in five years time when the dust will have settled on this Benoacore well I'm hesitant to answer to even answer the question because that's really a market process so we should not prejudge on what will be the market forces shaping the industry and it's not only about supervision it's also about technology which will be very important in the banking industry including over the next five years e-banking, a non-bank competitor, et cetera so I'm not going to be very prescriptive that's not my role here but I would say that I would expect the financing of the European economy to evolve somehow away from the traditional European model and towards the Anglo-Saxon model, the US model not of course all the way towards the US model it's not needed it doesn't make sense in the European context but I would expect a little bit less of bank financing a little bit more of arms length financing through capital markets including through a securitization and if we go a little bit in that direction this would make the whole system more resilient because it will be more resilient to shocks, hitting the banking system such as the one we've seen in the current crisis so a little more role for non-bank actors a little bit more of the originate to distribute model for bank loans which of course will create issues because we know that the originate and distribute model has failed in many aspects in the US so this will have to be monitored very carefully and one of the big challenges not really for banking supervision but for financial supervision generally will be to monitor the ability of non-bank actors to assess credit, to manage risk and to follow loans over the life cycle if we want to move in that direction so for me that's one of the big challenges Philippe LeBrand Yes, I think that's basically right perhaps the one point I would add is that hopefully we'll see a consolidation or further consolidation Greece has gone from 25 banks to five I would expect eventually Germany to consolidate that may take a little longer so I think what Benoit put out there is right plus hopefully inevitably some consolidation I think maybe just for the next year which is crucial because if this confidence game works it really has to work for the next year I think we'll see a gradual improvement sadly I think the contracting credit cycle will continue to probably be present for most of the year hopefully the second derivative will change and the contraction will become less but I do think invariably part of what's happening and this is the sort of bad part of the adjustment is we're gonna start to see we'll continue to see some deleveraging which is gonna weigh on credit and therefore I expect growth to be fairly muted on the other hand we have a global cycle that is on the uptick and we will have a cycle even in Europe even if structurally things are difficult the cycle will manifest itself and then I think the other theme that I'm very optimistic about for certainly for the next maybe year two years and something I think is not appreciated enough yet I think 2014 will be the story of a fantastic re-rating of the periphery in Europe I don't think Anglo-Saxon investors have fully understood how significant the structural change has been in the south of Europe, primarily Spain but even in Portugal, even in Greece so I think from an investment perspective we're likely to see a significant re-rating a positive re-rating of the periphery of Europe and hopefully this will help this whole banking process in that it will attract capital into the banks in the region that's been heard the most and then I have this sort of perhaps slightly idealistic hope and Benoit can comment on this perhaps or others in the room since we are almost in France here one of the things we can all hope for for the Eurozone because at the end of the day France remains a crucial piece of this and we haven't talked about it today but perhaps if suddenly France realizes that now it's the south that is outperforming now it's suddenly the south that looks much more competitive that that can be an added motivation for France to implement the kinds of reforms that will be necessary to make the Eurozone truly lasting and stable by having France return to being a strong, unequivocally strong member of the Eurozone so it's one thing to lose against Germany many soccer teams, many countries are used to that it's perhaps another thing when you start to lose against Spain, Greece, or Portugal and I think that would be in a way a healthy process for the Eurozone as a whole Well in terms of soccer we now got used to losing to the Spanish out for the past several years constantly we're not survive Well everything we're talking about now will be fully digested in five years time and I'm absolutely convinced that the financial industry will have fully reinvented itself so we don't have a famous clue today how we will look like then and I'm pretty sure that we will be in very good shape by then I'm afraid that's all we have time for in this session I would like to thank our panelists the only thing I would take away is the word that the Philippines at the very beginning which was fragile optimism fragile is also a favorite word of Mario Draghi lately I'm not sure if at the end of this panel we should put the emphasis on the fragility or on the optimism maybe slightly more on the optimism given the view from the markets thank you all very much


Next we've got Anita Gowers from the Centre of Art History and Art Theory at the ANU College of Arts and Social Sciences and the title of her three minute thesis is Putting the Frame Back in the Picture. This is an image of a picture frame. It isn't an Australian frame, but I know you've all seen this frame before and I'm confident in guessing very few of you would be able to tell me what artwork this frame belongs to and that makes sense because the role of the frame is to draw your eye to the artwork. It's not to be noticed. And Australian frames face an even greater hurdle of being noticed because our galleries, libraries and museums catalog the artwork, but they don't catalog the frame it surrounds and often the artwork and the frame is separated. Consequently our gallery libraries and museums have racks and racks full of empty frames that no one knows anything about. In addition, in the early 19th century attitudes to frames were different and artwork couldn't be hung or exhibited without a frame and these frames were made by expert craftsmen but today often those same frames are discarded because their historical information and value is unknown or unrecorded. My PhD pieces together for the very first time. The untold story of Australian frames and their impact on Australian art. To do this, I built a library of over 500 images of frames that I'd collected in 22 galleries public and private across four states. I've accessed primary source material in libraries and archives in Australia, France, America, England and Ireland and I found the first convicts with the skill of carver and gilder listed as their profession. To manage all these data points, I implemented a database that allows me to search the relationships between the artist, the frame maker and the artwork filling a vital gap in our understanding about the artist frame maker relationship and how the artist wanted their work displayed. This is important information for curators, private collectors and the public in understanding Australian materials. My PhD is important because although the frame may not be noticed it's embedded with a wealth of information about the artwork that it surrounds. The frame broadens our understanding of Australian design trends. It uncovers an under-acknowledged field of skill and expert craftsmanship and it provides insights into the artist's broad aesthetic vision for their work. Now let's return to our frame. We can see it's a similar surface area to the artwork. It's exquisitely hand carved, typical of the 16th century and it's finished in gold leaf. So from the frame alone we know it surrounds important artwork. This frame surrounds the Mona Lisa by Leonardo da Vinci.