The winds of change are blowing through European policy-making circles, says Francesca Passamonti, head of European regulatory and public affairs at Intesa Sanpaolo. In the corridors and meeting rooms of Brussels, she senses a new mood of cautious optimism, signs of commitment to supporting growth and an increasing openness to working with the banking sector in its pursuit.
This sounds like good news for European banking and for Intesa Sanpaolo, whose 2018-21 business plan, set out last month by CEO Carlo Messina, aims to build Europe’s number one bank.
“Attention has shifted towards growth-enabling regulation – a message barely heard during the previous Commission [under José Manuel Barroso], when we were in the middle of the crisis and the policy-makers’ main objective was ‘repairing’ the financial system,” says Passamonti, who has been in role since 2014.”
Now, with the latest figures from the European Central Bank suggesting growth of 2.3 per cent across the eurozone and 2 per cent across the EU in 2018/19 – and with the banks “more sound, more resilient, with better business models” – that restorative approach is easing. “Growth is back. Some of the reforms that were made are bearing fruit. On the continent the economy is faring well. Hopefully, we will see an increase in the ECB interest rate, which would be good for the banks,” she says.
The result, Passamonti hopes, will be a regulatory climate in which Intesa Sanpaolo will be able to lend more, boosting Italian business and strengthening the country’s economy.
Key to fulfilling this goal, she believes, is ensuring that the bank’s voice is heard in Brussels. “The banks have a real responsibility to get that voice right, to represent the bank, the clients and the country. We must analyse the impact that regulations can have on our ability to lend to the real economy.”
“I have a very clear and ambitious goal, to make sure we get a regulatory framework that will enable Intesa Sanpaolo to meet the business-plan targets. It is a competitive and dynamic environment and that is exciting. We are in a time of great change.”
It is a side of her job – as the company’s two-way European eyes, ears and mouth – that is getting easier.
“Intesa Sanpaolo is considered authoritative and credible by EU policy-makers. If we make suggestions, they are prudent and balanced – so they are heard. You build your reputation with a proven track record. We are an effective interlocutor.”
Intesa Sanpaolo’s ability to punch above its weight rests on its success. “We are seen as a sound bank that has weathered well through the crisis, delivering results and the commitments made. That helps me here a lot.”
Recognition that the bank’s expertise can be valuable to policy-makers is encouraging. She mentions cyber-security and digitalisation. “We are working very hard in these fields and see that the ideas we put forward get traction at EU level.”
Realism rather than romanticism remains key, she cautions. “The situation here in Brussels is complex and trust among member states has not yet returned to pre-crisis levels. We have come a long way, but there is still a long way to go.”
While the economic picture may be increasingly rosy, finding a way to accommodate the many and changing interests of 28 member states is a huge challenge.
Brexit continues to create uncertainty. “We are going to lose one of the largest EU countries. This is a setback for the EU,” says Passamonti. “Its EU institutions want to be strong. They want to show that the British referendum decision is a very serious one. The UK cherry-picking approach is not well understood here.”
The possibility of an unsatisfactory outcome for the UK is a real concern for European banks. “We do business with the UK. We do not want to see financial services totally left behind. It is about financial stability.”
The coming Basel IV reforms – devised by the Basel Committee on Banking Supervision and due to commence a five-year phase-in period in 2022 – are a case in point.
“These regulations are not conducive to lending. The consequence of the proposed increase in capital requirements for credit risks and operational risk are a big concern for banks who already front-run incoming regulation to satisfy market expectations.”
As the Commission considers implementation at EU level, Passamonti hopes for nuanced and specific judgements. “If the rules on capital markets are punishing for banks, then banks will not be able to help companies and SMEs in accessing capital markets, and in the end the real economy suffers.”
Reform of governance of the euro – with the euro area deposit guarantee scheme – is another concern. “The conditions that some member states are attaching to this project are so high that we need to consider whether we really want to go so far in strengthening the euro area.”
In the meantime, Intesa Sanpaolo will continue to build on the positive developments. Among these she lists Commission investment funds for infrastructure and innovation, and calibration of the rules for banks and insurance companies – an important component of the Intesa Sanpaolo group – in financing long-term investments.
“I have a very clear and ambitious goal,” says Passamonti, “to make sure we get a regulatory framework that will enable Intesa Sanpaolo to meet the business-plan targets. It is a competitive and dynamic environment and that is exciting. We are in a time of great change.”
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