Changing gears: about cycling and the future of banking

Frank Elderson, Executive Director of Supervision at Dutch Central Bank in this speech connects cycling and banking regulation:

When I took up this job as chief supervisor for the Dutch banking sector, summer last year, I realized again how much better shape the Dutch banks are in, than the last time I was actively involved in prudential banking supervision.

You see, I was leading the DNB team responsible for supervising ABN Amro back in 2006. I remember going to the Zuidas by bike, parking it right in front of that huge entrance of the ABN Amro building – which wasn’t allowed by the way. That solitary black bicycle, against the sheer backdrop of one of the tallest sky-scrapers of Amsterdam at that time, in a way that bicycle formed an early example of transparent supervision: since everybody knew it was my bike, every time they saw it they knew the supervisor was in the building.

Of course, it’s a story with a tragic undertone. The years 2006 and 2007 have a fateful ring to them. We were witnessing the tearing apart of the largest bank in the Netherlands. Less than a year after the consortium took over ABN Amro, on a sunny day people were leaving the Lehman head offices
carrying cardboard boxes. The rest is history.

How totally different to the picture we observe today! Today I see a banking sector that has weathered the storm, and has emerged stronger. Smaller perhaps, but more resilient, more focused and better capitalized.

Hmm.. It is quite transparent really, Usually, the banks do not want any sign whatsoever of a regulator parking their vehicles at their offices . It could lead to a signal that bank is under trouble and build expecations for a run..

Then he points to three challenges ahead for banks and their supervisors:

  • Anti-Money Laundering and Countering Financing of Terrorism
  • restoring trust in banking sector
  • forward looking risk management

He concludes by looking at ECB’s Single Supervisory mechanism:

Of course, and this is perhaps one of the greatest changes of all over the past twelve years, we are not going about this alone. Today, if you are entering your head offices, you may see not one bicycle, but two. Or a whole lot, if an on-site inspection is taking place. (Actually, this is a figure of speech. We have not yet completely succeeded in transferring our love for cycling to all our good colleagues within the SSM.)

Because I am talking about the SSM of course. I think the SSM has been a great improvement in the way we exercise supervision. If I only think back at the situation we were in, back in 2012, when the European Council’s decision about the banking union was taken. And in November 2013 the SSM was
formally established.It is hard to believe how much progress we’ve made in just a few years.

Many highly qualified staff had to be recruited. A complete supervisory framework had to be designed and be made operational, incorporating the best elements of each nation’s approach to supervision. And a close collaborative relationship with national supervisory authorities developed. It was an
astounding achievement, and the ECB deserves much credit for this.

We are now in a transitional phase. A phase in which the banking union is steadily taking shape, and the SSM is consolidating into a truly harmonized European supervisor. Based on past experience, I look forward to this new phase with confidence and I am eager to take part in it. That’s how we are continuing, safeguarding a sound banking sector in the interest of depositors and a prosperous economy.

Only one last thing: I would love to see more supervisors taking the bicycle when moving around in Frankfurt…

Typical Dutch ending..

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