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Max Jadot - "Banking in an uncertainenvironment: the challenges of the comingyears"Introduction by Michel Vermaerke, CEO Febelfin – FinancialForum 7 June 2011Your Excellencies,Ladies and Gentlemen,Ilya Prigogine, Belgian Russian Nobelprice winner for chemistry, said: „The futureis uncertain …but this uncertainty is at the very heart of human creativity‟.First of all, it is a great honour and true pleasure to introduce the speaker and thetopic of this evening. „Banking in an uncertain environment: the challenges of thecoming years‟ is a topic that, I guess, has unfortunately not only become quitefamiliar to all of us in recent times, but also poses a true strategic challengeto all financial institutions around the globe, in Europe and therefore also in ourown country.At Febelfin, as early as 2009, we defined our sector wide strategic agenda andas a result, we see three priorities: restoring confidence, being a constructivepartner in the debate on the financial architecture and ensuring the future ofbanking and finance activities in and from Belgium. The theme of tonight has adirect link with the overall strategic dimension of our agenda. And we Belgian Financial Sector Federation Rue dArlon 82 - 1040 Brussels | http://www.febelfin.be T + 32 2 507 68 11 | F + 32 2 888 68 11 v. 0.8
2could not have wished for a more prominent speaker than the recently appointednew CEO of the largest bank in our country, Mr Max Jadot.The process of strategic repositioning of the financial sector and its actorshappens at all levels, i.e. at the international level – within the G20 - as well as atthe European and Belgian level.Regulatory change is all around and affects every possible part of banking.Of course, there are the current and yet to come new prudential norms andstandards (the so called Basle 3), but there is much more in the pipeline. Justtrying to provide a summary of all the “chantiers” which have been openedand which will impact banks and their activities, would take me too far for this“mot d‟introduction”. But be it sufficient to say, that the regulatory cost willsignificantly, if not dramatically, go up, as well as the cost to ensure complianceand the need to provide proper training and development of the people in thefield and to ensure proper reporting to the authorities.Take Basle III for instance. These future capital and liquidity standards willimpose on financial institutions the obligation to raise both the level and the qualityof their capital and will have a profound impact on the asset side of their balancesheet. Banks are in the process and will have to further strengthen their capitalbuffer or as our Dutch neighbours put it in their typically expressivelanguage: “Buffers. Nederland moet meer vet rond de botten krijgen.” (Quotefrom NRC Handelsblad of 27 April 2011: Buffers, buffers, buffers. Nederland moet
3weer vet op de botten krijgen. Dat is de overkoepelende boodschap van LexHoogduin, directeur bij de Nederlandsche Bank (DNB)).Not only is regulation being profoundly adapted to the lessons drawn from therecent crisis, but also supervision has been reengineered, restructured andredefined at the international, European and Belgian level. The Belgian Parliamenthas been examining the question and has decided to reform our own supervisorystructure and architecture. This has resulted in a far-reaching reform ofsupervision in Belgium laid down in the „Twin Peaks Law’, which came into effectmore than two months ago.In addition to the changes in the field of regulation and supervision, the sector hasalso been confronted with the so-called “global banking tax debate”, resultingin our own country in a contribution levy or fee of 15bp on retail deposit volumesof more than 310 billion euro or an annual recurring cost of almost 500 millioneuro. For the years 2010 and 2011 an additional 5 bp extra levy has been charged,resulting in a cost of 1.4 billion euro for 2009, 2010 and 2011.Furthermore, there has been a debate on banking secrecy and this duty ofbanking discretion is also undergoing further changes with an obligation for banksto provide the central bank in the near future with data on bank accounts to bemade accessible to tax authorities. The modalities are still being fine-tuned, butinevitably banks will have to adapt and ensure compliance.
4These changes, however, are profound and likely to have a long term impact,intended and sometimes unintended. The banking sector has expressed concernabout the possible cumulative impact of all these changes and appreciates the factthat the authorities have at least built in a review process for dealing with theunintended consequences of Basle III, if ever the latter should materialize.The Belgian banking sector‟s stands on all these regulatory and supervisorychanges can be summarized as follows. We very much want to be cooperative andconstructive partner exploring through a constructive quality dialogue on how bestto achieve and implement these changes. In this respect, we make a plea for alevel playing field, proportionality and a cumulative impact assessment. A levelplaying field is key, as our economy is open and international with a bankinglandscape with 82% of all banks having their decision centre outside of Belgiumand taking more than 60% market share. Proportionality is important topreserve a well-diversified landscape and implies that the rules are the same foreveryone, but in the application and implementation one takes into account thesize and the risk profile of financial institutions. A cumulative impactassessment is fundamentally important for measuring the impact on the banks‟lending capacity and therefore their capacity to finance the economy. Thatbeing said, let it be noted that since 2007, the banks in this country have beenproviding an extra 15 billion euro in corporate lending and 40 billion euro in
5mortgage credit, i.e. a total amount outstanding (encours) to householdsand companies of about 310 billion euro.Ladies and gentlemen, this is the framework and the background against whichour sector and the banks are also strategically positioning and repositioningthemselves. And this also raises the question of the future of banking activities inBelgium and from within Belgium to the rest of the world.I am most confident that this evening will be very interesting and mostinformative, not only because of the topic that has been chosen but also becauseof the speaker who will deal with it. I am sure that Max Jadot, who has been atthe helm of BNP Paribas Fortis for more than three months now, will capture theattention of each and every one of you.Mr Jadot indeed is a commercial and merchant banker with an outstandingreputation and curriculum.Some milestones in his already impressive career will illustrate this :After his graduation, as a law student, from the Catholic University of Leuven andthe Georgetown law school in Washington, he went to work for Générale deBanque in 1983. Working not far from here at the counter of the Place Madouoffice, he started in the field (“sur le terrain”). This has marked him from thebeginning as a man and a banker with very hands on experience and knowledge ofthe field; He quickly moved upward to become the head of a whole series offunctions and responsibilities within the bank to become early on already the
6manager in charge of marketing for the Brussels area. Having spent some 15 yearsin retail banking, he moved on to merchant banking and became head of theCorporate Finance Department of Générale de banque.I have been told that when, in 1999, Générale de banque became part of Fortis,unlike others, he decided to stay aboard given his commitment to his team. Hisfunction at Fortis was that of managing the merchant and investment bank. Oneof his many achievements was the initial public offering of InBev Breweries, whicheven today, still ranks among the most important initial public offerings ever to beset up in Belgium. Max Jadot has played a major role in the successful organizationof this initial public offering. As a gifted mediator, he succeeded in reconciling theinterests of the different stakeholders.His long career in the field of corporate finance and investment banking of coursehas given him expert knowledge of the Belgian corporate world, a world he isalso familiar with thanks to his family ties and his membership of the BekaertBoard of Directors. Max Jadot is the great-grandson, in direct line, of Léon Bekaert,who founded the Bekaert company. The success of Bekaert over these last fewyears is the result of a clear strategy in combination with a stable shareholdership.Max Jadot is widely considered as one of the key contributors to this success.However, at the beginning of 2007, he made a major career move by becomingchairman of the Executive Committee and Country Manager of FortisFrance, an entity which had to be reorganized without delay, and he brilliantly
7succeeded in doing this. He was one of those who quietly yet firmly stood strongall through the crisis that resulted in Fortis Bank being taken over by BNP Paribasin 2008.He continued to achieve remarkable results and so, quite naturally, he was theperson one turned to when the direction of the former Fortis Bank had to beentrusted to a Belgian banker. As a banker by nature yet capable of showinggreat discretion, he has now become Belgium‟s prime banker and the face ofBelgium‟s leading bank.He will be directly confronted with the current challenges or should I saysometimes ’struggles’, the first one having to do with capital requirements. In thefuture, we shall be witnessing an internal proverbial war between businesslines within one and the same bank. According to the Basle III rules, both thelevel and the quality of capital must be raised. Consequently, there will be tensionswhen a decision has to be taken about spending capital on one particular activityor market rather than on another. Some difficult choices will have to be made.Next, there will be a struggle for deposits between the institutions, since in thelong term, according to a recent study by Société Générale, the European banksmay well needstable means for their funding up to an amount of 1,800 billion EUR. This will alsohave consequences for the funding of the economic activity, for the loan/depositratio will have to be reduced. This process of credit becoming more scarce and
8more expensive will hit SMEs harder, because their capacity for finding directfunding on the financial markets is not the same as that of big companies.Finally, the biggest struggle may actually be in the field of services to beprovided. The crisis has sharpened the expectations of the customers, who arelooking, among other things, for a straightforward and more outspoken ethicalattitude from their banker and who have become utterly sensitive about prices.Customers want their bank to be innovative when it comes to services beingoffered and rendered.His expertise as a banker should make Max Jadot very well capable ofsuccessfully dealing with all those challenges, more than anyone else.But to conclude, one thing you probably do not know, is that the CEO of FortisBank is also known as „Monsieur Astérix’ at BNP Paribas. This anecdote goesback to the period immediately after the acquisition of Fortis Bank exactly twoyears ago.As is the custom for all heads of Businesses, Max Jadot had to give a presentationof his activities and by way of introduction and so as to make him known better,he handed out a copy of „Astérix chez les Belges‟ to the audience.Max has been keeping up this tradition and almost all of his speeches hold areference to Astérix.
9Frankly, I do not know if and when there will be hint to Astérix (this evening), butHarold Geneen, former CEO of ITT once said: „Uncertainty will always be part ofthe taking charge process‟. Mr Jadot, the floor is yours.