In organising the agenda for today, we have made a conscious decision to have joint sessions for both IMAP and standard formula firms. This is because we recognise that some firms currently on the standard formula may wish to apply for an internal model after 1/1/16, and also because firms currently in IMAP that fail to obtain model approval, whether full or partial, will need to move on to the standard formula. Almost 90% of our regulated firms will be using the standard formula, and I can assure you that we will be taking a rigorous approach to ensure that the Directive is being implemented as intended by standard formula firms. As an organisation we are looking at Solvency II holistically, rather than in silos, and it is important for firms to do the same. Bank staff will be on hand throughout the day to answer any questions you may have; however if you have any queries that aren’t answered during the sessions today, please contact your supervisor. The end of the track is now in sight on Solvency II preparation. This will likely be our last large conference in advance of transposition. We recognise that it will take time for the new regime to bed in, perhaps a number of years; but now is the key time for firms to get in place the processes, approvals and, above all, the recognition and acceptance that Solvency II will be the new normal.
That said, the trend going forward is less favourable, calling for mobilisation  2.1  Three factors are currently raising concerns  Despite the quality of this snapshot for 2018, the outlook – the medium/long-term trend – calls for vigilance and mobilisation. Three factors are effectively weighing on the profitability of both French and European banks. The first two mainly concern retail banking: continuing low interest rates and digitalisation. The maintenance of a low interest rate environment is completely justified and necessary in light of the economic situation in the euro area. However, it is also squeezing net interest margins for retail banks, which finance themselves with deposits and not at variable rates in the market, as well as reducing returns on insurers’ investments. In the case of banks in particular, the issue should certainly not be ignored, but we also need to avoid blowing it out of proportion by claiming it is the only factor weighing on euro area bank profits. On April 10 the Governing Council explicitly said: “In the context of our regular assessment, we will also consider whether the preservation of the favourable implications of negative interest rates for the economy requires the mitigation of their possible side effects, if any, on bank intermediation.”ii Let’s allow time for this work to be done and for the necessary decision to be taken.