Delegation of the Fonds de Garantie des Depots (FGD) took a two-days of working visit at OBA. Group of the delegation was led by Thierry Dissaux President of FGD who spoke about the visit and the current challenges FGD has recently.
1, The crisis has not spared only to the CEE region but also the Western part of the EU. Despite this fact we have not heard news about any bank closures in France. Are the French financial authorities so efficient and effective in the crisis management and prevention, or the banks are so stables?
Yes, despite the turbulences and with the exception of Dexia, a Belgian-French bank, the French banking sector has weathered the crisis pretty well. Indeed, the French Supervisory Authority played a very consistent and instrumental role with this. Leading banking and financial institutions also took decisive actions at an early stage to limit their risks and to strengthen their capital structures. Their capital Core Tier 1 ratio reached 9% in June 2012, maintaining their credit capabilities at a high level in the Euro zone in 2011 and 2012. Liquidity ratios have also been reinforced.
2, What should a foreigner know about the French banking industry? How do the banks perform recently?
The French banking sector, with roughly 650 banking institutions, employs almost 400 000 salaries and is the 3rd most important economic sector in the country. It is a highly concentrated industry (6 largest groups encapsulate 75% of the credit institutions), strongly internationalized and diversified. In 2012, the sector maintained its profits despite external shocks and uncertainties.
3, What kind of challenges FGD faces recently?
The FGD currently faces 3 main challenges. First, the development of a new IT system able to handle a depositor payout within 20 days on a large scale, including a single customer view tool and a revamped institutional web site as the first step.
Second, a full integration of the new or renewed resolution responsibilities which a draft law still under discussion within the Parliament, will grant us. Technically speaking, this should in particular include the set up of a bridge bank. Last, the FGD wants to keep on actively contributing to international discussions and regulation projects with its counterparts and with all international institutions working on these matters. In view of these elements, the FGD plans to expand its organization from 5 to 12 people in the coming year.
4, FGD conducted a two-day visit in Budapest. Why did you choose OBA and what was the purpose of your visit?
OBA is indeed a very experienced and impressive DIS in the European region. Since its creation in 1993, it has proven a constant ability to handle banking crises while maintaining an agile and innovative structure. Your payout system has been developed and improved for years and has again demonstrated its efficiency and performances recently. Last but not least, your website also constitutes a genuine benchmark on the continent, as for your advance in the use of social media.
Starting to build a new payout system and a new depositor oriented website in France, we were very happy to have this opportunity to take stock and to benefit from the experience that you have accumulated along the years. We are really grateful to you for this.
The program OBA prepared for us included a detailed review of how OBA handles a bank closure, how its Single Customer View and pay-out system works, how its banking transfer system and the OBA Payment card works or what the use or social media communication means. OBA ended this enriching and formative session with the lessons it drew from its payout experiences in 2011 and 2012.
This has been an intense learning experience for FGD. In addition, given our similarities in terms of structure and size, and given the deep friendship built between both organizations along all these years, this working visit was a real success for the French Deposit Insurer.
5, Handling cross-border issues has a growing importance among deposit insurance organizations. The FGD and OBA signed claim handling agreement back in 2007 was the first such a cooperation between a Western and an Eastern European country. Where do you see the benefits for these agreements and what kind of fresh experiences could you obtain regarding cross-border issues?
There is no debate that all deposit insurers have to integrate cross-border issues in their mission.
Sharing views and experiences between Deposit Insurers is critical to build relevant views and tools that will help contributing to financial stability and to banking crisis solving, with or without cross border impact.
DIS business could be thought as quite uniform or standardized in the world, or at least within the European Union. It is not. We have a lot to share and a lot to learn from one another. The signing of this agreement in 2007 was the sign of the full confidence we had vis-à-vis OBA. Years went by; our confidence has just grown more and more.
6, How do you see the efforts EU makes for the financial stability and protecting depositors specially in the aspect of the currently discussed bank resolution directive?
This draft directive will be a very important step for all our countries, as well as for the building of the Banking Union. We fully share its objectives. Some resolution instruments can only be efficiently built at the level of the Union, whereas the Union is the only appropriate level to correctly deal with cross border coordination.
Now, DISs throughout Europe, amongst them OBA and the French FGD, have an outstanding experience in crisis resolution. We think it is important that the new directive fully acknowledges the role and missions of DISs in this field.. In our view, DISs should be recognized as resolution authorities or at least as one of the resolution authorities in any given country, so that their experience and their role in protecting depositors could be fully integrated in resolutions schemes.
7, How do you see the future for the European depositors? E.g. in foreseeable time will they benefit increased coverage limit or do you see any other spectacular improvement in the close future?
The recent Cyprus event has contributed in the end to reinforce and also to institutionalize the €100 000 coverage limit. Resolution tools should also benefit directly to depositors protection as a mean to minimize the effects of bank closures and deposits unavailability. Resolution instruments should be key in further assuring the stability of the banking system and protecting clients from failures. The latest discussions in Brussels could also lead to the institutionalization of some forms of depositor preference throughout Europe. From a depositor point of view, these are positive developments.