Welcome everybody to Frankfurt School. Welcome Madam Nui, chair of the ECB supervisory board. Welcome Frau Lautenschläger, vice chair of the ECB supervisory board and member of the executive board of the ECB. It's an honor to have you here at Frankfurt School. Welcome students, staff, faculty, friends, welcome journalists here to the ECB youth dialogue at Frankfurt School. I'm Andreas Horchler, I'm in charge of communications here at Frankfurt School. I promise this is not going to be about us on stage giving speeches today in our Audimax. As many of you are used to it's going to be about you, your questions and your remarks to our guests today. We're not forgetting that we call this event a dialogue and that's what it will be and I'm very curious to have your questions later on. With your questions either live or via Slido online you see that please get out your phones and program Slido and no wonder our code today is ECB, so that fits I guess. And now without further delay please welcome Professor Michael Grute, Vice President, Academic Affairs here at Frankfurt School for introductory remarks and a welcome here to Frankfurt School to our guests. Please, Michel. Thanks a lot, thanks a lot Madame Nui, thanks a lot for a lot Michel Eger for being here. This is a great opportunity for us to get into dialogue while Andreas looking at you and me it's probably the young at the young at heart or something like this. But it's a pleasure and an honor to have you here seriously. So the you too you don't really need introduction but it's probably fair to say that you too belong to the architects and the heads of European banking supervision and European and with this European financial stability and so the we have the two main figures of European banking supervision with us tonight and we were just talking minutes before so are there any question left and yes there are many questions left right so the it's it's not that the speed of change in regulation did come down a bit but still there's a lot of work in front of us and also the students that means also a lot of work in front of you no matter from which side you're looking at this either from being regulated or from regulating right so there's it's not yet settled probably it will be never settled so we're talking about the stability mechanism the single supervisory mechanism and so in theory at least this should be so governance should be somewhat problematic right you have national supervisors you have European supervisors and you have this attached to the ECB ECB who is responsible for monetary policy so this could be one of the cases where theory predicts trouble practice works fine we hear about this from your side right so the that well we look at this so and Frankfurt school is proud to host this event we have a long history as banking academy start in back in 1957 so it is something our students have been regulated since ever right that's something pretty normal and we're very much used to this so either and and regulation is in many of what we many programs that that we run be it in executive education or in academic programs and what I found out over the last years I think is again another shift in perception of regulation so let's say before 2007 2008 regulation was something that you try to avoid right then after 2008 not surprisingly there was a face when regulation was something was asked for banks also needed guidance and your general kind of positive view now I think regulation has ceased to be a daily topic I'm sure this might be different Italy now but in in general this is something you just accept as a given all right so it kind of sank into normal nevertheless the the next test for the new European regulatory framework is surely had no one knows when but we are pretty sure there will be instances where this new framework is going to be tested you both are responsible for shifting this away from us in time and also you're both responsible for designing the framework that is going to be tested and I'm very much looking forward to your statements and to your questions and answers and again I invite all of you to ask everything you ever wanted to ask about your banking supervision this is the time you won't get more expert level knowledge than these two thanks a lot for being here I'm looking forward to this evening thank you professor grote thank you again ladies for being here on stage and forgive me having this handheld microphone I couldn't withstand it because I have such a long history and being a reporter so I am so used to this that I couldn't resist it welcome to Frankfurt school once more Daniel and Sabine Laudenschlager with in our meeting up front we calculate a little bit we have 60 years of expertise in banking supervision on stage together 68 years now can you imagine this and you know there are some students here who might say well all this law stuff all this regulation that's so boring is it boring it's not boring at all I am 68 soon to be 69 and I am learning every day really sometimes more than I ever dream to learn for example when we had to close Latvian banks I knew nothing about Latvian law I had to learn it fast we had to learn it fast together but well no it's never boring it's not enough boring as a matter of fact sometimes you would like to prepare on Friday afternoon for a nice weekend a little bit of rest and no it's not possible there is a bank somewhere doing stupid things and we have to prepare something some action can you second this I join her sometimes a little bit too much it's one of the most sexiest drops you can have all right thank you for this initial statement we take more than 2,000 decisions per year in banking supervision how many do you take per year on monetary policies I mean because she has another job on top of that she has monetary policy so ladies gentlemen we have a little direction here up front that this is not going to be mainly about monetary policy of course but this is going to be about supervision about an entity that just came to life I would say in comparison in European affairs something that would be a blink of an eye namely less than a year you built up a new multi lingual multi international body that now is in charge of supervising banks how did it go so fast well because we knew that it had to come fast we had a tough deadline we were supposed to take over supervision in November 2014 we could have six more months but to have six more months was considered a kind of defeat not a good achievement so from day one we were certain that we will do that before before November and we were a tiny start up in a powerful incubator the ECB without the ECB would not have been possible but I started on 2 January 2014 I had left in Paris 1100 people that I was managing in banking supervision in insurance supervision and I had two secretions on top of myself I had two secretaries a counselor on the secretary of the supervisory board so I was feeling very light really for once and then it started pretty fast but you probably want to add to that Sabine well I came four weeks later yeah and I think we had increased already four times or so we were 12 then we know each other for many many years even decades because France and Germany sit together next to each other in the Basel Committee so so we were always next to each other when arguing negotiating discussing and deciding about global standards hence we well we we work together very well in the Basel Committee yes absolutely and we even work better in in this field now let us just I mean think about it we got 26,000 applications if I remember correctly in this first year 26,000 which had to be processed yeah so that's what Danielle means with the incubator yeah there were HR people IT people of the ECB helping us we looked for about 1,000 staff I think in the first yes we have 28 different nationalities the only language which all of them all of them understand is English yeah banks have to get accustomed and got accustomed to using English to 128 banking groups huh with 1,200 banks under supervision and the and the major challenge I think was to have the comprehensive assessment in parallel of building up the institution you know without staff doing a comprehensive assessment is quite interesting right it is and given given that we we have a youth dialogue here what kind of people signed up for these multitude of new jobs all kinds of people frankly yeah and what is interesting as well is that the core recruitment is different depending on the countries my assessment is that it's more lawyers in Germany in France it's more mats for insurance on big banks or business schools as well where you have a good mix but in my view what is important is to have a strong education somewhere on which you build on the rest you can learn you will learn during your professional life we need statisticians we need IT people we need lawyers we need mathematicians we need statisticians a lot of people and many many came from the NCA's from the national competent authorities who you know people who had already experienced as a banking supervisor we got some people from auditing firms some bankers too you know which is I think a change in in the perspective as well as in the working environment when you go from the private sector to the public sector I mean what I I might share a joke with you because I heard many bankers saying we always thought that you had more regular working times when you are in the public sector forget it yeah it was worth they say it was worse than in banks yeah so we had well we had lawyers yes for sure some some even historians I mean historic people who study history you know yeah not so many but I mean at the end you need to have a certain kind of intelligence a certain kind of active behavior yeah when you are too how can I say this when you are not outspoken enough you cannot talk to banks telling them I don't like what you do so you need to be a little bit forceful yeah not a shy person as a banking supervisor you are usually not shy person yeah and we are you will see this in the next hour to come very difficult to stop when talking okay okay we'll see yes all right agreed upon in this adventure having to do it so quickly has there ever been a point where you thought okay we might fail we might not manage no that was not an option and the momentum is is an asset quite sometime when you have a tough deadline you deliver when you believe you have plenty of time you lose your time into details and you don't move fast enough forward in my view yes I mean I don't I don't start a work thinking about I might be failing one one little remark here the Slido is filling up I have a little iPad here where I can read we don't need to turn our heads later on yeah what we will try to do later on is that we always want to have a mix one question from Slido one question life from the floor if we manage to do so so not only Slido we want to hear your voices as well I like the first question already very much you like it very much hold on not answering right you raised my curiosity yeah so talking to students many students studying finance studying management here at Frankfurt school in this youth dialogue if you could go back so four years in time five years in time would you set up the singles of a risery mechanism the same way as it is in action right now or would you do some little things maybe differently I would say broadly the same I don't even see what we will do that differently well I think there is room for improvement yeah but you have to you have to imagine what you can do within this one year under the legal environment you have yeah hence it was very good to have the ECB as an already European institution with a settled HR and IT as well as an yeah a kind of experience how to solve different interests yeah in the European environment yeah so the setup was correct for exactly the timing and the problem we had at that point in time if you are what we call greener visa I don't know what you say how you say this in English green field you might feel yeah okay then you might wish for here and there a different set up yeah but you have you live in reality and let us be very clear for banking supervisor yeah it's always very clear that you live in reality so you make the best out of what you have and I think indeed there is always room for improvement and yes there is room for improvement and it's a fast-changing environment so we will always have to change yeah so you are evolving yes are constantly well the legal environment has to evolve to for example just to give you an idea not talking so abstract yeah I would have love to have a different delegation system for doing decisions yeah but the environment is that all the decisions have to be taken by the governing council because the primary law says it has to be the governing council I would expect yeah at one point in time to have a delegation framework as well as a decision-making structure yeah which takes care of what should be the really very important high level you know almost to death decision taken by the governing council and which small ones can be taken please not by us but by head of divisions or head of sections that would be wonderful that is what I mean with regard to you have to live with reality because the legal environment is as it is exactly right okay looking to the future of banking do you think banking models will change radically due to the arrival of disruptors like fintech we deal a lot here at Frankfurt school with those entities showing up now and kind of changing the landscape is this on a regulatory basis on a supervision basis gonna change the picture as well well I think bankers will always do the core mission of banks channeling putting links between investors and borrowers but they can do it in many different ways obviously they can do it in a more modern fashion with fintechs using IT as the tool to do banking business more likely they will use all kinds of tools because it depends very much on the profile of the customers my granddaughter which is 22 is doing everything with a telephone but at the same time she is not managing the savings of her whole life and she had good eyes and she does not have rheumatism in her fingers so when she will be my age she will go to see a traditional banker spend some time to be explained what is best to take care of the savings of her whole life whatever the amount of savings and she will not use his fingers that easily either that or she has a very large framed screen right properly and not go to the bank if there will be a bank as we know it right now but the core of the question was also a little bit when things turn to the gray a little bit and can move away of the possibility of supervision right this shadow banking you mean this is a threat as well for your business as well as for the banks right well I don't want I don't know whether you want to start I don't feel threatened with regard to our workload yeah just to give you some kind of comfort yeah we are far from being bored and there's enough to supervise yeah but you are correct you have to see the competition via fintech and in different ways yeah first of all it can be a chance an opportunity for banks to to change their way of doing banking activities yeah to use the data in a different way they have collected via their customers and that is the one item yeah the second one is yes they they get additional competitors which pick out certain activities part of activities of the banking business which might not be even under a license requirement and there it gets really tricky yeah so if you have competitors which are not regulated hence they do not have the cost which come with the regulation and the supervision yeah then you have to ask yourself as a banker how do I sequence my banking activities and might I outsource something you know which is not directly linked to the license in order then to have a certain kind of of de-burning yeah or the other way around if I were you know somebody like professor Grotto who seems to be concerned that there is enough regulation coming up in the next 10 years you can ask yourself when do fintech companies move into an environment where it is justified to have to be regulated you know when do they go into an area where out of data protection out of financial stability issues or whatever it seems to be necessary to put them under supervision yeah I mean it's it is it's it's a two way street and and for sure we will see perhaps in the next 10 years a change in the in the big companies where some will move into the regulated areas because they want to do the whole portfolio yeah when others will try to keep into in the unregulated area and when the first crisis sits because of a fintech company we will be back to regulation yeah it's always you know regulation and supervisors have a conjunctual cycle too thank you very much before as promised opening up to you one last question to our two panelists which is very simple but very interesting for students I think how do you like your job the job of being a banking supervisor I like it very much I never thought when I started that I would stay for more than 40 years but each time I thought maybe it's time to go and I had opportunities that were offered I got something better to do promotion or a new job new opportunities in banking supervision including traveling a lot I was in Basel for seven years as secretary general of the Basel committee I am in Frankfurt and I've been in Frankfurt for the last four years on the whole it's a great job that is able to offer this kind of opportunity in New York I was in New York too I was forgetting New York in 84 85 was when market operations were starting on the in Europe you were looking at the movie Wall Street as if it was something very big on a big change and I was asked is it like that in the US no it's not like that it's 10 or 100 times bigger in fact on more complex and madam you have to confess one of the big advantages of Frankfurt is that it's four hours by train to Paris well I in fact I take a plane and to be honest I know I know but train might be depending where you live in Paris well yes well I live in the center so both are I don't know why my husband is taking trains more often than it's a choice of the people and I'm taking planes so often to try I visit each year the 19 supervision national supervisors that are working for us because we have currently about 1500 people working for us in Frankfurt counting as well the support services that are helping us from the rest of the ECB and we have 2000 supervisors working for us in the 19 countries so I visit them once a year to say thank you for the good work that they have been doing during the whole year and also to explain that I will still need the help in the coming months and explain the priorities and so on and so forth so I'm taking place on planes all the time so I get a custom I like it it's easy you can work in the lounges yeah I know but also same question how do you like your job and when I like my job very much and I'll tell you I'll give you an example I like my job the best on Friday Friday morning at 9 o'clock we both have weekly meeting what we call weekly meeting and it means that the senior managers come together and we talk about some of the upcoming cases you know some crisis cases or we talk about policies which we would like to change approaches we need to still establish etc etc and it's it's it's unbelievable rewarding to first see the staff around the senior managers and then you know when we we get presentation about certain topics you have the staff who prepared this around first to see the committed people how much dedication we have how you know how people live with their work yeah and second it is unbelievable rewarding to see that we have so many different pools of experience yeah just to take the German supervisor I I'm super I mean I'm a supervisor now for 23 or 24 years I haven't experienced a real real estate crisis because the prices were flat in Germany during the years I was a supervisor yeah and my Spanish colleagues they know everything about real estate crisis yeah so when we are talking about real estate the question of valuation the question of what kind of tools do you have in order to get a trend very early what kind of new products do we see what kind of national laws do we have to look at in order to see some triggers or some concerns etc you have to ask the Spanish guys they know everything and I'm able to ask so I get to know a lot about market risk from Danielle because she survived yeah some market crisis yeah in in France yeah and I can share I think quite a lot about my experience closing down banks yeah because I in Germany we do have some experiences which other countries do not have yeah or experiences about IPS we have a very specific situation in Germany which moratorium etc yeah I can ask my Spanish colleagues about other things so the learning curve yeah and that's coming back to your first items you can still learn with 68 and 69 you can learn until you are 90 when you work for the SSM yeah I mean it is an open field with 28 nationalities with 28 different approaches learned from from the national competent authorities merging coming together and asking I mean that is our job on Friday at 9 asking for the best approach mingling the approaches yeah and that's why we are so happy with our job because we design the future of European banking and you already did in parts you already did in parts in the past four years yes for sure did we have different views both of us no no no whether we designed the future of banking oh yeah much tougher in many and we were much tougher in many issues which the national supervisors might not have been so tough oh yes we look on the debate on non-performing loans yeah I know we I think we got quite a lot of concerns for many external stakeholders we designed the future ladies and gentlemen this sounds like a fascinating place to work but I bet you put in from the get-go like 60 70 80 hours yeah so you think it over think it over if you want to apply for a job there first questions I would love to see I know that there are some journalists in here I would love to see the journalist questions towards the end of our discussion and please let the students ask first and as announced I would love to see a mix of live questions and slido questions and I would like to start with a live question if there's any right now to start with you're not a student come on anyways let's try this my question is how the ECB protects the personal safety and security of the bank supervisors who go into countries where they may have less than gentlemanly reactions being told they are probably doing something wrong or maybe shut down I'm not thinking of Germany or France right now but some countries where the supervisors go in and may encounter maybe a little bit of hostility to the arguments or questions that they bring my question is what the ECB does to protect their personal safety and security well I am not very knowledgeable about all the resources that are used by the ECB maybe Sabine is because she is in the executive board of the ECB on what is the the rules of the games the way the ECB is managed the budget of the ECB is treated in the executive board where I am not myself but I always felt safe in doing my job when we are in going going to countries which are difficult I even to be honest feel overprotected sometimes I think well that cannot be that needed so I don't see any issue I'm pretty sure that if we were doing money laundering supervision for example because this is something which is discussed whether there should be a money laundering authority for Europe personally I believe so I think it will be more complicated probably the degree of safety the level of safety should be bigger and again I am sure the ECB or European Commission or European institution can deliver this kind of protection which is probably not that easy for small countries with big neighbors in this issue but really we are well equipped with the ECB we can have somebody joining us or team when we are going in places where there can be turmoil but again I felt overprotected to be honest well first of all when there are onsites you usually don't go alone you have several people around you which always gives you a certain kind of protection then I mean you are usually not facing I mean you are not facing criminals yeah these are bankers yeah they open up your your files well usually you'd I mean no I mean yeah so I'm not aware that anybody was threatened in in body or you know in in these kind of yeah I'm not aware of this but if there are very tacky questions to look at yeah one of the possibilities yeah to de-burden yeah the onsite inspectors is and that we do use sometimes is to ensure that we have a cross-border onsite inspections meaning it's not the nationality or the the onsite inspectors in in the banks you know coming via the ECB are not not from the same nationality but they are from other nationalities yeah hence you move in you look into the files you move out and you will not see the bank or the country again if you do not need to yeah which is I think something what not only gives you a certain kind of protection but it gives you and and and here we we are thriving to increase these part in the cross-border onsite inspections it gives you a broader scope of views too yeah but I but I think really I mean I have never heard from from somebody who was bodily threatened yeah you have here and there sometimes a quarrel yeah a vocal one because people have different positions yeah but it's not in a in a in a it's not like in a bar fight yeah that you get with your fists etc but it's rather the question of are you able to say very clearly no are you able to to to put your point on the table and and be you know straight in your back and and that is should be for supervisor and when you want to be a supervisor you need to have a straight back yeah and you need to be a forceful in in in your positions and outspoken so you you are not supposed to be vague nor are you supposed to say or perhaps you can do yeah but but you need to be much more forthcoming I expect you to do yeah I expect you to do exactly all right slido question so there's a shift in number one and two and three questions and of course the nature of some of the questions is more of a political nature and the top question right now is do we need a common fiscal policy in Europe well it's totally out of my territory as European citizens I would have a view but you are not here to listen to Daniel Nui European citizens so I have nothing to respond to that I would like Europe to be as united as possible we should be European jurisdiction but even in the US there are different states the different taxes in the different states yeah it depends really what you understand under common fiscal rules I mean we do have stability and growth pact we have rules around budgets which are related to the fiscal part and for sure these kind of rules should be complied with yeah they are very important in order to cope with the hit with otherwise an upcoming heterogeneity and in particular for the currency union it's very and for a monetary union it's very important but when you are talking about a joint fiscal budget yeah for all of the are we talking about the euro area or the EU I think it was an EU question 28 minus one yeah then you need to have all kinds of conditions and requirements to met to be met before yeah but I join and this is a political question and for sure something would need to be decided by the governments and not by banking supervisors but I'm a European citizen too so I fully joined Daniel privately yeah we need to move forward in in in the integration and that is on a political on a fiscal on an economic and in a financial point I think our importance yeah in the global context is extremely dependent on that we are united in the euro area that we are united in the EU because all of our countries alone are not important in a global on a global perspective thank you two remarks by European citizens and not in their function they're sitting here today so you pointed this out except the company a compliance with the fiscal rules absolutely which we have already in the stability yes yeah question from students up there let me move there or you might go it's pretty far up there please good afternoon I just wanted to ask that while designing the future of banking from a regulatory point of view how much has ECB considered cryptocurrencies and if they have to what extent have they considered them thank you we consider cryptocurrency when they are a risk for banks so we try to understand how much the banks were involved in dealing with cryptocurrencies which for the time being is very little but it's true that certain market infrastructure start listing quoting some cryptocurrencies and that's source of concern for me because that could encourage the banks the banks we supervise to be more involved in cryptocurrencies but for me cryptocurrency is not a currency precisely it's a kind of casino and if banks are willing to take casino risk for sure we will try to stop them on check how they mitigate the risk and then control the risk but for the time being it's not the source of concern to the best of my knowledge I don't know if you have a different view Sabine well on the banking supervisory part no and I would add too if you hadn't said it already for me these are not currencies digital assets that's how you call them very very clear answer that you probably didn't expect right in that clarity I guess let's go to Slido real quickly this is one for Sabine Lautenschläger what is the risk of treating government bonds as risk-free assets on banks books well I mean let me let me take my personal position first I truly believe that when I go in the capital framework for bank you know according to risk sensitivity meaning I'm looking at the assets and ask and require banks to cover certain risks according to the risk sensitivity of the assets then sovereign and sovereign bonds should not be kept out of this risk sensitivity so I'm not so much in in favor of having a zero risk rate for sovereign bonds I think there should be according to the risk risk rates put to them and I would always look as a banking supervisor too on the concentration risk link to it so meaning what kind of exposure does one bank have in one sovereign bond class yeah in order to see and that we do with large exposure rules in all other classes too in order to to ensure that a bank is not putting all the X in one basket to say it bluntly yeah so I don't believe that being French I have a different view I think they are not risk-free so if it's not risk-free it deserves a capital it can be short to start with but small but if it's not risk-free it deserves to have capital in front of the risk so we had some questions now live we might continue by those who were is this still actual in the corner here that you but we might start here as well okay going forward okay and link to the last question from Slido do you think or was it an issue in the latest stress test to stress that out whether there should be some some capital for this what was it sovereign sovereign bonds do you do you remember the scenario no I to be honest I don't remember there is some elements but they were bigger in my view in the previous a vast stress test it was not the main element this time but there must have been something to be honest those are a vast stress test we are not even voting in a bar Sabina or I or the SSM so we take the scenario for what they are and that was not the main focus it's good that we are not setting the scenario because we could be suspected of playing games maybe taking scenario that we would prefer to have so we take what we are given and we make it implement we implemented for our banks and do the quality assurance so in 2016 it was a major part this I think in 2018 you have it any way indirectly via setting certain rates in REE you know for for the rates but I'm very sorry that I didn't focus on the last back to Slido real quick and I see that that for both questions even though they are completely political and you will now say I'm not going to answer to this 15 people each liked it so I'm still going to ask those two questions number one do Germany and France also also influence the decisions of ECB as they do EU if yes to what extent and the number two can the Eurozone survive a downgrade of Italy's credit ranking to junk which will destabilize its finances and force massive bailouts all two strongly political questions but a lot of people feel some sympathy for those I at least want to ask them we we try to forget the nationalities really and to make sure we manage in fact Sabine is more taking care of the French banks now and I'm more taking care of the German banks to precisely demonstrate neutrality and we focused really on the on the banks more than on the nationality of the bank on the banking system in fact it's also why I like to visit the 19 national competitor authorities the 19 countries because in Frankfurt I see the banks I compare a bank with another bank or other banks but when I go to these countries I can feel the DNA of the banking sector and I have to do a little bit of homework to know better what are the specificities of the banks so it's the it's the way it works really and I think it was already like that in the Basel committee and I think it's the same in the supervisory board people have influence based on their credibility if they are hard workers they know what they are taking talking about and they are able to explain on convince to convince other people it's not a matter of nationality very much well it happens that we are French and German but just like that well let us not forget at the supervisor board we have 26 authorities being represented yeah meaning that if there are discussions or when they are voting it's not the Germans or the French being in a majority yeah but it's rather that each country has one vote plus theoretically six ECB representatives which means we have 25 which are bringing together their knowledge and their positions and opinions and hence it cannot be dominated by Germany and and France in the decisions yeah it's even the other way round yeah because the vote of small countries like Lithuania Slovenia or whatever is as important for Deutsche Bank on BNPP or Santander as the German French and Spanish vote so it's incredibly democratic thank you very much we had many questions you we forgot the second one I can give you an answer if you wish well well please do you still have it in mind yeah yeah I know which it is it's about the Italian yeah yeah yeah first of all I would like to really stress yeah that in the last five years and that is you know about the design of the future of banks yeah we did our utmost to strengthen the European banking sector and that means we strengthened Italian banks too yeah in law he's in capital improvement of governments governance increase or improvement in risk management more liquidity yeah less NPLs okay so the resilience of the European banking sector improved quite a lot yeah that is the first fact I would like to stress here yeah otherwise we are going out of this meeting with with nothing and and the rest let me be very clear I mean this is an if situation if whatever yeah a lot of ifs sometimes most interesting for audiences right yes and wouldn't I wouldn't blame anybody for asking those questions no no no you shouldn't you shouldn't but as a banking supervisor too it is very important to always understand and to make the audience to understand too that we see banks idiosyncratically so we are not seeing banks as banks coming from a country and that's why banks are like that like there are weak banks and strong bands in each of the countries of the 19 ones we are looking at so we see them idiosyncratically with all of their nice cities and not so nice things there might be some advice from you to the political Europe in Brussels probably from your findings in your jobs right because well we have different objectives and tasks I mean I would refrain from giving recommendations there because our objective is a different one we may make recommendation on the legislation for example I spend a lot of time asking for harmonization of the legal framework improvement in the fit and proper the the qualities that the senior management on board members must present in a bank which is an all part of the directive minimal harmonization taken a long time ago so not fit for for the challenges of new banking we advise a lot on legislation because we are ask of use we give them doesn't mean that we get them to be honest but we express it thank you we have a lot of questions you have been waiting there in the back for so long and one person over there has been waiting and as we did two sliders we're doing two live questions right now quite a stretch to walk maybe I've become visit you over there in the meantime okay please go my question goes for both the panelists actually the way you describe that you meet in the Friday meetings and take various decisions or policies decide upon them do you feel that there is a lot of bureaucracy in ECB and to an extent that leads to a lot of unnecessary delay in the decision taking process if you believe so then how can we maybe see that this thing doesn't happen or that's all thank you want to keep it in mind and we collect or do you want to answer while I'm going up there okay you might answer in the meantime you like to answer what I can start well I am not a fan of bureaucracy but it's also very helpful to help us do our work the quality of the processes the procedure what is delaying action is what Sabine already mentioned the lack of delegation we are probably one of the very few if not the only one international institution with zero delegation capacity in the text which when you take more than 2000 on around 2500 decisions per year you see you don't need the bureaucracy to create something heavy or not agile enough it just the number of decisions that we take so that's why we would need to have this delegation capacity in the in the text something which is also creating difficulties is that we are we would like to have regulation in Europe meaning rule that is implemented as such and directly from Europe for the SSM we have directives mostly on directives are transposed in 19 different ways in the different countries I could not believe the level of creativity we could find in the transpositions of directive in the 19 different countries so also this is creating delays we need to have a lot of lawyers I don't know whether they are lawyers in this room but if we go on like that you have a brilliant futures on a lot of jobs because we we need to have the different teams able to explain to us the national transposition of the of the directives so this is what is maybe not permitting us to be agile enough so this is what should be treated bureaucracy I don't believe really but Sabine in fact I am spoiled because Sabine in the executive board is taking all the administrative decision that could turn in in bureaucracy I am the one doing 100% supervision thanks to Sabine helping on the administrative decisions in the executive board but I think you first really have to define what bureaucracy is about yeah when you try to move 26 authorities with about 3,000 4,000 staff all together in the same direction for the same case meaning you have to ensure equal treatment yeah then you need some procedures around it and you need a common approach in order to ensure that you are not going into different directions for the same risk with the same business yeah and the same rules because rules are usually not that concrete yeah you have a lot of discretion as a supervisor which makes it so sexy being a supervisor you have a lot of discretion yeah so this is for me not bureaucracy but it's rather the question of how to harmonize and to ensure that you have a credible equal treatment with the banks yeah the rest is I mean we have a delegation question because of the primary law and and the legal environment we have to live with and the rest is not so much bureaucracy but it is rather the question of are you used to change the way of working which you did the last 20 years in your national authorities and now you move into a different environment yeah and sometimes people see this as a bureaucracy but it's just a different working environment yeah I mean you yeah you have to you have to use your computer and click you know certain things in in buffing for example too and now you have to click a different IT system with a different mask with a different yeah counterfeit but it's it that is not for me bureaucracy yeah no not really we are pretty hands-on you know yeah very yeah very yeah you've been waiting for a while now please how my question is so there's there has been a mess between certain risk-taking and the profitability driven activities in the banks and as we have seen after financial crisis may some European banks has been shrinking or deteriorating from market making market making activities because of the certain regulations and there are also some there are also some major European banks performed very bad not not very bad before just a bribe above the threshold on the stress test and but the but after ever since financial crisis their performance is has not been improving significantly so what's your opinion on a more consolidated European banking industry considering currently there are more than 6,000 European like banks in your area well there are a lot of good questions in your questions let me start on a with consolidation the last point yes we we have probably an excess of banking of offer of banking services in Europe and there should be some consolidation supervisors are not the people that should tell what is good consolidation what is a good merger the banks the investors the market participants should decide what are the good mergers but we have a very important role nevertheless supervisors we have to say yes or no when we receive the the request for authorizing a merger sometimes it's a blunt no to start with for example we can say two weak banks I use a German stance I believe huh to make us make a swan and I say two sick ducks don't make a swan so first you clean your balance sheet and then you come back to see me and we will discuss a possible merger but most of the time we do a lot of work to see what is making sense where are the synergies what are the the benefits and we end up with conditions for example if you do that you need a bit more capital for cleaning the balance sheet for non performing exposures for example or for covering different to have a bright new IT because the your two ITs that you would like to merge will never talk together they are too too old-fashioned or whatever mergers are very dangerous operations they have to be properly assessed on the proper condition have to be to be put in general when we put our conditions the banks consider that they are far too tough some would say extravagant but we stick to them because we believe that they are the good conditions on all ways they are just enough in fact because they are execution risk they are synergies that were foreseen but are not yet there then you mentioned non-performing exposures market operation well first of all the risk appetite for market risk on market operation has gone down after the crisis a lot it will not stay like that because bankers are human beings on human beings forget the lessons that they have learned painfully some time ago so the current context is also permitting to have more leverage finance for example so we supervise very carefully leverage finance non-performing exposures those are the legacies of the crisis mostly not only but mostly on that we don't want the banks to enter into the next crisis with the legacy of the previous one that would be a bad start on for sure a recipe for disaster but I adjust the surf on the issues I'm sure you want to add things on this well with regard to consolidation I mean we Daniel already talked about the mergers etc about perhaps shrinking the balance sheet I could add one of the items we have to get used to is to that banks exit the market our task and objective is not to ensure that all of the banks you know will forever be established and be you know in the market existent but our task is to see a problems coming pretty early identify them assess them and then you know have an orderly solution whatever the solution might be a merger and a capital increase a shrinking of the balance sheet or an exit from the market yeah and the last thing often was not really yeah seen as a solution but but at the end banking is a very economic activity meaning if you want to have a healthy banking sector yeah the ones which on a permanent basis do not have a viable business model cannot find a viable business model and do not have other solution they should exit the market here we have many questions that are political oriented but one that is basically yes or no and I like it because 39 people like this question and it speaks for the sympathy you're creating here do you offer internships yes ECB as is offering internship and it's even thanks to the SSM double internship because they are the internship that existed before the ECB and they are a specific internship for SSM for supervision and if I remember well the program is spent partly in the ECB in Frankfurt and partly in one of the national competitor authority in another country what do I have to bring to the table for an internship well I that I cannot tell but go today to the internet website of the ECB and that you will see what is required the competition is tough there are a lot of applicants all right our next question from here the gentleman here over here has been waiting the longest I think microphone is over here if you raise your hand probably again because I don't know if you'd seen it please hello many thanks to both of you are Michael French and be a grad so I would like to articulate my question in two parts the mrs. Louton Schlager you mentioned two main things one is you talked about resilience the second thing was basically you may you say banks are is an economic business so my question is if the the prerogative of the European Central Bank is price stability to what extent regulation constitutes a threat to price stability which is by in which is infinite economy and economy prosperity and the second part of my question might be out of your scope of responsibility but I would give it a try for how long do you think that the European Central Bank will be buying time for structural reform and political changes thank you well yeah shall I start the for sure because hey well I mean much money to see the first part yeah yeah the first part is for sure monetary policy also I have to admit that I have a little bit of a problem to understand the question because price stability is always an economic concept yeah in an environment which is reality and reality is that you do not have that there were always rules and regulation around it yeah so as as somebody from from the monetary policy part you have to live with the regulations done by the EU parliament or the national parliaments etc yeah that is reality and there might be consequences coming out of it for example if you have regulation in in certain economic sectors which restrict economic activities you will you might see this in in the growth prospect of a country if you have very tight labor market rules for example you will see this in the growth perspective but you have to live with this as a as somebody from the central bank yeah I mean that it is as it is yeah as I say it's it's Reynish I you have to laugh about it because we are both we are both from the area from the Rhineland and there it is a flugel to sport is what it is it is what it is yes and it had not a younger yeah yeah sorry that is only for the Germans yeah and only for the one understand colon accent yeah okay and the second question was what was the second question again it was about buying time buying time well the the monetary policy decisions can only be based on the objective of the central bank and the objective of the central bank is to maintain price stability or to move to price stability in the medium perspective yeah in the objective or the goals you want to reach as a central banker cannot be and should not be buying time for others it might be yeah a kind of unintended consequence yeah for the one or the other but it cannot be the goal or the objective so when you are an environment like in the last years where you do have forward-looking price rate and insurance rate an inflation rate I'm very sorry an inflation rate of very clearly below 2% you know all of you know 2% below close but below 2% is our is our aim when you have inflation rates which are relevantly below the same you have to think as a central bank about what are you going to do and what kind of measures standard measures first and then might be non-standard measures you have to take in order to maintain this price stability goal yeah but it's not about buying time let me be very clear too when you do have when you do have these kind of standard and non-standard measures you might be setting incentives for external stakeholders yeah which is not your goal yeah but that doesn't mean that you cannot just ignore if you are not having price stability yeah but you have to look into when when you are balancing your decisions you have to look into what are you supposed to achieve in what kind of time frame and what are the cost what are the risks what are the side effects and one of the side effects can be that with a very extraordinary expansionary accommodative monetary policy that you increase the risk for financial stability for asset bubbles etc and that you have to monitor on the longer you you have these accommodative monetary policy the more the risk increase and hence the balance you know for changing monetary policy changes you know to the other side which means I'm very much in favor of ending and exiting the net purchase programs just to be concrete we would not have asset bubble if the the the structural reform were taken and by that I mean so you are proposing you are proposing not to do anything in order for the others to do the right things is also you have an objective of price stability I mean even I as a German and I'm typically pretty conservative and monetary policy as a drum yeah I wouldn't do I wouldn't say this yeah so if you do have a very low core inflation rate as well as HACP both though in the medium term you have to take your standard measures otherwise you don't do your job but you have to take over the time horizon a kind of cost-benefit analysis because the longer you have these kind of accommodative monetary policy the more the risk increase and when we are talking about asset bubbles depending on where they are being produced and and emerging there you can take some of the macro potential tools you know the new macro potential framework which can then de-burden monetary policy from these kind of considerations when you use them accordingly and forcefully yeah so if you do see for example real estate bubble I would expect the counter cyclical buffer I would expect the LTV ratio I would expect the risk-rated assets ratio to be increased but not only for banks but in the overall environment yeah in order to then mitigate these kind of risks I fully understand that the points and I appreciate your engagement but my let me finish my point what I mean you you also touched it we the scope is is the whole economy by with the European Central Bank pushing in the money supply we will again not face any asset bubble if the if the the government so the the structural reform and the and the policies were basically taken by creating what we are omitting in Europe that is that is actually investment opportunities for our economies we need to create this investment opportunities to basically absorb the the supply of money that we have that actually was a response to the 2008 event so this is actually my point when I was saying when I was saying how much time are we buying at the European Central Bank for the politics okay thank you for the clarification but let me clarify to I fully agree with him I fully agree with him and I mean if you look into as soon as you look into the introductory statement of the press conference or of the president of the ECB you will always find quite a strong quite a strong message coming from the ECB there needs to be structural reforms being done the national economies have to get more competitive they have to open up their service market they have to do changes in in the labor laws in the investment policies etc so here I fully agree but for me your question was rather you know a little bit like don't do anything because otherwise the others don't yeah I would say that structural reforms are in the hands of politicians and we are a democracy this is where the limits of what can be done by administration on institutions even great institution with good credibility reputation and so on and so forth can do I think we have to to respect the job on the limitation of powers as well due to the fact that it is seven minutes to six and we agreed to be done by six let us try to take two sliders right now so one is again a political question the Federal Reserve has acted is about to act again rising interest and the formulation here is why is it that ECB doesn't try to normalize the interest rates and the second question maybe you answer to this one the second question is to Mrs. Nui what was your greatest challenge during your time as the head of the SSM and what was your greatest mistake maybe we start with a Fed question and the follow-up by the ECB which is again of course monetary monetary policy well I think the Fed is working with an environment where the cycle is in a different status or yeah so meaning they have an economy and they look into the labor market to by the way which we do not have as an objective and they have an inflation rate where the yeah raising interest rate is in a different with a different reasoning behind it we are not yet there not yet fully there for us the next step will be the final decision on exiting the net purchase programs and and then doing a decision about the design of the reinvestment yeah and as I told you very concretely and very bluntly like a supervisor yeah I'm I'm quite in favor of doing the final step exiting the net purchase programs and designing something what is flexible in the reinvestment part which will still have a huge accommodative consequence and follow-up to design this kind of reinvestment in in a flexible way not too long in order to to adapt and adjust to a changing environment with regard to the inflation rate and we just have to I think compare the core inflation rate of the of the US with ours in the medium and in the long term and then you see the differences yeah but I'm confident yeah I'm confident yes thank you well I tend to focus on the next one so I would say my biggest challenge is tomorrow challenge I don't know exactly what it will be otherwise I would maybe say non-performing exposures because when you start with a trillion now we are at 650 about billion but it's getting down almost by each day because the tools are in place now biggest mistake well in it will look complacent on the organ but in fact we have a system that is preventing mistakes to a large extent because we did it building this institution very much together Sabine and I we are we don't take decisions alone you have understood we have no delegation so all decisions is what we propose to the supervisory board members because it has big chance to be taken not always but I'm not always without difficult discussions but it's important to propose the the good way forward and if it happens that Sabine and I do not agree on what is the best way forward well then I want to take to have a second thought really on the discussion with Sabine it it happens very very scarcely but it may happen small very small percentage so I we need to understand why in this case is it that we I am I am wrong let's take my example maybe I'm wrong she's right okay I can admit it very very easily if this is the case or maybe she will abstain she is not against but for we are a little bit too nice in proposing a positive solution and I have a tendency to be pretty tough on fact I have the reputation of being pretty tough but for example when you have a bank coming willing to take care of dozens of billions of non-performing exposures in one shot if the banks is willing to have a little bit of accommodation on certain things I would tend to say yes really and I think I am still fair because something which is important you can be tough if you are fair if banks believe that you are not equally tough you are in trouble but for example we when we were asked for massive one-shot sales of non-performing exposures and to have some kind of carve out of the loss given default for this specific portfolio for the parameters of the models if it's really a massive one-shot sale and this is possible in the legislation the room for maneuvering is narrow but it exists in the legislation that's one of the points on which I would say okay let's have it to get dozens of non-performing exposures out of you know one shot of the balance sheet Sabine my thing twice on may abstain on this but in fact we know perfectly well why we are and it's not so different at the end of the day so for me my insurance is that Sabine agrees with me if she agrees with me I don't make mistake I am sure we come from different perspective different countries different past but if we disagree on something we have to discuss it and to know exactly why on whether it's a strong disagreement or just we are just close she's not making the ultimate last step well which is a more balance than anything else in this case internal mechanism that yes I think it's a four-eyed principles the four-eyed principle that we enforce for banks exactly exactly we use it very well so we reached our time but I guess we start a little late so if anybody of you guys have a really short question to come to an end we would gladly take it from here you have one over there please and oops so she's moving I'm so sorry to not get a second short don't worry so journal journalists are on and not a journalist but but in banking so do you feel now confident enough so that we have overcome here all the troubles with too big to fail too complex to fail too many to fail so yes or no that's a that's a yes or no question and please let us collect up front here the the very final question then because I that he'll be in right now first row here second row yes and we collect collect both questions okay all right so my question is in Europe we see a lot high numbers of corporate debt and as soon as we're ending the really low interest rates in Europe and do you think that we will get in trouble or a lot of firms were not able to pay back their debt so one non is there some question well the first one definitely was one well too big to fail as soon as we will be a single jurisdiction in the euro area and this is the objective we should be a single jurisdiction the supervisors take their decision together around the same table in the in the same board but we asked we are still missing the the backup the the joint backup for the single resolution fund and we are still missing the deposit guarantee scheme as soon as we have that we will be for sure a single jurisdiction plus our efforts to harmonize on to treat all the banks in the in the same fashion then we are too big to fail has not disappeared but what is too big to fail for a single country may not be too big to fail for 19 countries in the euro area and on top of that we have make we have made some progress in addressing too big to fail as such whatever the size of the jurisdiction we have these tillac or emerald what we call in our jargon gun concern capital meaning capital that can be bailing to liquidate the bank meaning that those who take the benefits of the bank when it was making benefits are also the ones that pay the bill when the bank is not doing well then we will be more equipped to also take into account on address the situation of too big to fails even in a bigger context but for the time being we are not a single jurisdiction yet unfortunately but that would help to fix certain issues of the past like excess of banking services in Europe we have to move towards a single jurisdiction in my view second question was about corporate debt well I mean for sure when you have a long period of a very accommodative expansionary monetary policy with a lot of liquidity in the market where people are looking for you know for search for yield and there's always a risk when you have a kind of snapback yeah of the interest rate with with you know getting out of very liquid market there's always a risk of do all of the actors and all of the you know companies have a strategy how to cope with an increasing rate environment or less liquidity there is a certain risk to it and it means that we have to and we do this yeah we have to raise awareness to to be prepared yeah and being prepared means that you have diversification in the different financing yeah tools that you have a diversification in maturities that you have an idea what kind of collateral could you for example use because it's quite different to have a corporate debt with regard to a bond or having a debt with with a bank yeah so yes I think it is very important that people get prepared yeah for change but I cannot imagine I do not know but I cannot imagine that you will see a quick change in in a very big steps you know what I mean depending on how the inflation rate is evolving for sure I mean it's data dependent important is to I I believe that not only preparing but being aware that the growth pro prospect you know when companies can earn themselves out yeah of these kind of financing needs when they have when they are competitive yeah in their environment we are coming back to the structural reforms and and the regulation you meant you know when they are when they are having a positive future yeah then you will always see an improvement where other stakeholders take over you know the financing because this this company has a future so being prepared means not only diversification but but being healthy yeah having sound policies as a company etc having a good a match between debt and and capital cash and liquidity needs etc but I'm new SSM now has and it's a it's a good tradition to to have a closing remark looking into the future SSM now has a his small very small history of four years therefore it's appropriate to ask where does it stand in four years from now well that's a bit complicated to respond I do not have a crystal ball but what I know is that there will be a next crisis I don't know when it will come I don't know what will trigger this crisis so we are very much thinking about making sure that the banks can sustain the next crisis this is something that we all have in mind and that's why we are putting such a big focus also on non-performing exposures or assessing valuations of market risk through different instruments we need to be to have safe on sound this is all the the whole story in fact we need to have safe on sound banks on our job is to make sure the bank are safer on sounder on these includes to to make sure that they are ready for the next crisis wherever it comes from thank you very much in addition to that remarks the next four years well I would rather ask myself where would I like us to be in four years I think that is I mean for sure I would love to have more harmonization in the legal environment yeah to have you know more regulation and not directive so that we do not have to work with 19 different national laws which we now apply 19 different national laws I would love to have a new insolvency law yeah so I wouldn't I wouldn't be so ambitious to say I want to have one European insolvency law but I would like to have one additional one where companies can opt in to have a European insolvency regime you know where you at the end can provide for the capital market for the financing of companies a bigger market because often cross border financing in companies are not done because you know stakeholders do not know or do not want to deal with different national insolvency laws so like you know having the European society the European company yeah it would be good to have one additional European insolvency law I think this would bring us forward you know in not only banking supervision but the capital market union in in in many many issues these kind of things I would like to see evolving and that would help us quite a lot yeah indeed so we have a wish list and we have on the ground preparing for the next crisis ladies and gentlemen this was the ECB youth dialogue and again with Daniel Nui and Sabine Lautenschläger and it was a pleasure and honor to have you here at Frankfurt School thank you very much for sharing all this