Director General Anneli Tuominen
Helsinki, 11 May 2017
Dear colleagues, members of the supervisory board, dear guests….
First of all let me say, it is a pleasure to see you all here in Helsinki.
When I first learned about the timing of this event, I was not thrilled, because I was afraid that in the middle of May we could not yet enjoy the beauty of our Finnish summer. However, even I did not realize that in fact we would be experiencing one of the coldest and most freezing springs ever. I do hope you find it exotic. Please remember, you were warned in advance!
This is the first external SB meeting. It coincides with the 100th anniversary of Finland. That is why we wanted to show you our cultural heritage through musical performances. The music of Sibelius is very dear to us and reminds us of our history.
The experiences of the past also shape our values and our approach to the challenges of today and tomorrow. Irrespective of our different backgrounds and customs, we at the SSM have a common goal that we strive towards: a healthy banking/financial sector in Europe and a stable financial system.
Major crises normally make us more willing to accept change. Before the financial crisis, European decision-makers were confident that a less binding collaboration between supervisory authorities would suffice to preserve stability. Now we all know how wrong they were. What we really needed was a more intrusive supervisory stance, a single supervisor, the SSM and a new way to resolve banks. We can be extremely proud of the achievements of the SSM during its first two and a half years. We now have a supervisor that combines the best of both worlds: genuine independence thanks to ECB staff in Frankfurt, and knowledge of the local banking markets and culture thanks to local NCA staff in different countries.
We have achieved a lot in harmonizing supervisory practices in the SSM area. Examples of this include common ways of doing SREP and policies concerning national options and discretions. Consequently, banks are better capitalized, their governance structures and risk management have improved. At the same time, however, I have been wondering whether the tools available to the European supervisory authorities, EBA, EIOPA and ESMA are adequately responding to today's challenges. I have also recently observed an unfortunate trend whereby promoting national rather than European interests has become more common amongst some ESA members. But that is not the topic for today.
The SSM could not operate without the good collaboration we have with national supervisors. This is illustrated by the language we use: we talk about 'joint supervision'. The working tool is the joint supervisory team, JST, as we call it. For that reason it is more than natural that the SB should also take a break outside Frankfurt in order to see the life of a national supervisory authority – this time a small and integrated one. As a matter of fact, one of our values here at the FIN-FSA is 'together', meaning doing things together in good cooperation both with our stakeholders and internally within our own organization.
The SB members will learn more tomorrow when meeting with our staff, but I can already tell you that the changes in working methods, including the intensity of supervision, are huge. We have enormous respect for the professional expertise of the ECB staff. Sometimes, however, we miss the ease of decision-making.
Turning to Finland…. Since surviving the banking crisis of the 90s – of which many of us in Finland have traumatic memories – the Finnish banking sector has remained in solid financial condition. It has not, however, allowed the supervisor to become bored. Our three largest banks have a market share of approximately 80 per cent. One of them has become a significant branch. Another bank is considering a branch structure solution. If both these SIs were to be branches, branches would have a stake of almost 50 % of our banking market. The third of these banks has changed its goals to become an active player in health care, a move outside the borders of traditional banking. Nordea is now considering moving its headquarters from Stockholm either to Copenhagen or Helsinki. If Helsinki, the Finnish banking sector would account for almost 400% of GDP. So challenges lie ahead, and the SSM is a key factor in ensuring effective supervision also here in Finland. We need a strong supervisor that is not afraid of using its tool pack when there is the need. (This is especially true if Nordea decides to move to Helsinki.)
It seems that, so far, the managers of Finnish banks have remembered the hard lessons learned in the crisis of the 90s, but due to our increasingly digital world, the focus of bank management is now shifting. Starting a health care business is one example of banks seeking new sources of income as FinTechs and existing technology giants challenge their existing ways of making a profit. It is yet to be seen how digital processes will change the banking industry. What will be the Uber, AirBnB or WhatsApp of the financial services? What will technology giants like Google or Facebook do in this area? Even though digitalization is already now one of the priority areas in the SSM, we must invest enough resources to understand what is and, more importantly, what could be happening. Some banks are also investing heavily in the development of new digital services and improving the efficiency of existing ones. We, as supervisors, must ensure that at the same time the banks take good care of their existing services and IT systems, without compromising good risk management.
A word of warning: the menu this evening has been chosen by me. It is rather sweet. But you should trust me: the mint jelly with the meat is worth testing. But I do not want to keep you longer, please enjoy the dinner. Bon appétit!