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Interview with Süddeutsche Zeitung

Interview with Danièle Nouy, Chair of the Supervisory Board of the Single Supervisory Mechanism,
published on 24 January 2016

Ms Nouy, another financial supervisor once said about you that you are the most Prussian Frenchwoman that he knew. Was that a compliment?

I’m not fully aware of the nuances the word “Prussian” has in German, but I can say that I do often feel very German, that is true.

In what way do you feel German?

Well, the people here work very hard, are reliable, and are tough, but good negotiators. They also get the things done that they set out to do. I like that. But, on the whole, I feel European.

And how does that show?

I feel that challenges we used to tackle on a single country level can increasingly only be addressed effectively at a European level. Clearly this holds true for my work as a supervisor, but also as a European citizen; it seems to me that issues such as addressing the inflow of migrants can only be solved at a pan-European level.

Is Frankfurt only a place to work?

No, absolutely not. I feel very happy here. I live here all the time. My husband may be in Paris, but at the weekends he usually comes to Frankfurt. Last week I was in Paris again for the leaving party of Christian Noyer, the former Governor of the Banque de France. Before that I had not been to Paris for four weeks; although, like every year, Christmas was spent at my holiday home in the south of France. And I was back in Frankfurt for New Year’s Eve.

In traditional Frankfurt fashion on the Eiserner Steg bridge over the River Main?

No, I don’t feel comfortable at all in crowds. My husband and I stayed at home and had a nice, quiet evening meal. And on New Year’s Day we went for a long walk in the forest near Kronberg, and then stopped off at a café in the beautiful Schlossplatz – a perfectly pleasant afternoon.

Do you already speak some German?

No, unfortunately not, that is my great weakness. French people of my generation are, unfortunately, bad at foreign languages. Fortunately, I was recruited here as a banking supervisor. No one would have given me a job as an assistant (laughs). Most Germans speak English really well, and often French too. The checkout assistant at the supermarket where I always shop, for example, has always talked to me in French since she found out that I am French.

You travel a lot. Do you worry about terrorist attacks?

No, I am not the worrying type. I don’t want to change my life because of terrorist threats. The terrorists want to influence the way we live. We should not allow that.

Many people say you are the second most powerful woman in Europe after Angela Merkel. How does that feel – to suddenly be in the spotlight?

To be honest, I don’t like being in the spotlight very much. I’m not used to it. That’s why I miss the old days, when supervisors still worked behind the scenes. So far there have only been two times in my life when I have had a job with great personal visibility. When I became Secretary General of the Basel Committee on Banking Supervision, I was asked if I was ready to also be the face of the Basel Committee. I told myself, ok, this is new, but I’ll learn. That prepared me a little for my current job perhaps. I know that it’s part of my job, but it’s certainly not my preference. I don’t like all the public attention.

Many prominent people do like it.

Yes, and I don’t understand that at all. So many people cram their lives into the internet, into the social networks. That’s incomprehensible to me.

Your career began at the Banque de France, where your father also worked. Did that have an influence on your decision?

Not at all. My preference was, in fact, to work in a private bank. But that was not so simple back then. When I applied to a private bank at the beginning of the 1970s, I was told the job I wanted was not open to women.

That can really drag you down, can’t it?

Not really because I was always very self-assured; I just had to change my plans. “What I don’t know, I can learn” was my motto. I am still that kind of person today; and I like what consultants say: “A problem is an opportunity”. Even when I was studying and was pregnant with my first child, I was always convinced that I would easily be able to combine the two – no problem.

You did not give up, but looked for another job.

Yes, and that was not at all the way it was planned at first. I was studying, expecting my first child, and my husband began his career. But then he was unexpectedly called up for military service. There was no other choice; I had to find a job. We had just moved from Paris to Bordeaux. So, like a lot of French people, I took part in civil service recruitment competitions and joined the Banque de France.

And what did your father say?

He wasn’t happy because he would have liked me to attend the École nationale d'administration, or at least join a private bank.

Did you have any idea at the time in what direction your career would take you?

No, and I still say that to young people today. You shouldn’t make too many plans. You should be ready for any adventure. When you choose your first job, it is not always for your whole life. However, at the time, I thought about it very carefully: “Now you are at the Banque de France. What are you going to do there to also stay attractive to the private sector?” So I thought the best thing would be to go into banking supervision. Then, later, I received offers every now and then from the private sector, but they were never as attractive and rewarding as my jobs in supervision.

You have a fearsome reputation. Many bankers are scared of you. How do you do that?

Me? But I’m so small and thin. You cannot be scared of me (laughs).

How do you do it, then? How do you handle the bankers?

It’s not so much a personal thing. You have to base all your arguments on the in-depth knowledge and the expertise of your own people. We have very good people here at the European Central Bank (ECB) who really like their jobs and do them well. This “collective wisdom” prepares me very well. However, when things get difficult, you definitely also need to have your own opinions. And then I tell the bankers frankly what I think.

How do you talk to the bankers? Do you use very legalistic language?

No, not at all. I am a lawyer, but you should not weigh your arguments down with legalese. It’s about the substance. I explain my judgement and expectations to the bankers and inform them that they will also receive my comments in a letter. And do you know how most of the bankers respond after such discussions? “You are a bit too hard, Ms Nouy, but you are right.”

Does it sometimes get heated? Are there tensions?

Well, sometimes the bankers threaten us with legal steps.

Really? Does that happen often?

Very occasionally, yes.

German banks always say that they don’t take legal action against the supervisor. Are there differences there?

Yes, in other countries, the small banks in particular, sometimes take legal action.

We are now in the eighth year since the crisis. How safe is the European banking system today?

We are just in the process of putting the recent financial crisis behind us, so not every bank has fully recovered from it yet. However, I have no doubt that now, with the European banking union, we are in a much better position than we were before. Due to the comprehensive assessment, a sort of health check for banks, the banks have raised a lot of capital, in some cases even more than they had to. However, we have not solved all the problems yet. In some countries there are still a lot of impaired loans on the bank balance sheets. For my colleague Sabine Lautenschläger, the Vice-Chair of the Supervisory Board, and for me, dealing with this is somewhat new, because these problems were not as prevalent in Germany and France. However, we take good advice from, for example, the IMF and our colleagues from countries such as Ireland, which have found very good solutions for reducing bad debt.

Presumably, this concerns Greece, Cyprus or Italy?

I don’t want to point to any specific country.

Last week the markets were worried about the banks in Italy and their level of non-performing loans. Is the ECB monitoring them more closely?

One of our priorities for this year is to look at non-performing loans in all the banks we supervise across the euro area. To this end, a working group is gathering additional information from banks across the euro area to look at the technical aspects of dealing with NPLs. This is standard supervisory practice. The experience of managing NPLs across the 19 countries of the SSM means that we can benefit from best practice approaches.

Do you expect bankruptcies? In Italy and Portugal, shortly before the end of the year, some banks were saved from ruin. What is going on there?

The supervisors and politicians there wanted to sort out some problems before the new laws entered into force. Since 1 January there have been European rules on the resolution of banks which include creditor liability. For savers, who of course are also a bank’s creditors, this means that their money is safe up to €100,000.

Do you think Europe’s savers know that?

I hope they do. Naturally, as regards the question of liability, it always depends on the structure of the savings deposits in a bank.. They should choose their bank very carefully.

Do you actually have a vision of what the European banking sector could look like in ten years’ time?

No, because the situation is different in each country. In some countries the banking systems are very concentrated: in France for example there is a small number of big banks. In other countries, such as Germany, the range is much larger. I think that diversity is very good. The concentration in France was the outcome of the banking crisis in the 1990s.

But you are expecting something from the banks?

They should examine their business models to make sure they are profitable in the long term. Banks must not underestimate the seriousness of the situation, since the low interest rates are depressing profit margins. For some banks, the solution may be to merge with each other.

But you are putting the banks under more pressure because you are demanding even more capital over and above the statutory requirements. This Supervisory Review and Evaluation Process (SREP) is controversial. Some German banks are complaining that they got poor marks simply because they were publicly owned.

No, that is not true. I dare say those banks themselves don’t believe what they are saying. But, of course, they don’t like these new requirements. We have done the SREP (this comes at the end of the annual supervisory process) very well and, above all, fairly. Everyone was treated the same. That is very important for me, because only then can you take tough action. On the Supervisory Board, all these decisions were taken with extremely large majorities, if not consensus.

The banks also complain that there are far too many institutions involved in banking supervision and regulation, and that they contradict each other.

Sometimes the banks look for contradictions in order to take advantage of them. But it’s true; Europe is complicated. I would also prefer it to be simpler. Also, many laws in the area of banking supervision are made at the national level, resulting in a legal patchwork that makes our work more complicated and less efficient. But that’s just how it is. I have to comply with the laws.

As a former French banking supervisor, do you have special relationships with French banks?

Well, I have been supervising the French financial sector for more than 40 years now. At this point in my career, and at my age, I now have the fantastic opportunity to supervise thousands of banks in 19 countries. That is very exciting, so the French banks don’t attract my particular attention. I have been far more involved with the Greek banks, and all the banks from other countries that needed attention. Very often I ask Sabine Lautenschläger to make the decisions in relation to French banks (and vice versa).

Ms Lautenschläger, a German, is supervising French banks, and you, a Frenchwoman, are supervising German banks.

Yes, and as a matter of principle, the head of the individual joint supervisory team for any particular bank does not come from the country of the bank.

Does that strengthen friendship between the peoples?

Yes, of course. (laughs)

How do you react when a banker calls you directly?

I don’t particularly like it when bankers want to discuss their problems only with me. They should do that first and foremost with the people in charge of their banks. Only when it needs to be escalated will I look into it, and we will find a solution.

And if you know the banker well?

It does not change anything.

The decision-making processes in banking supervision are complicated. When you make a decision on the Supervisory Board, this must be presented to the Governing Council of the ECB for non-objection. Has anything ever been sent back?

No. We are talking here about thousands of decisions which are presented to the Governing Council. These include decisions that never even reached my desk nor the desks at the next level down in the hierarchy, because the SSM Regulation does not foresee delegation. I do not think that the Governing Council can look into every detail. It has to trust the Supervisory Board

That all sounds like hard work. What does your family think about you having this top job?

We do not discuss it much. One of my daughters works in the financial sector, but we never talk about work. Altogether, my family must be proud of me, because I haven’t made any serious mistakes yet (laughs).

At the ECB people speak English. Does that feel strange, always working in a foreign language?

No, it’s normal and puts everyone on the same level. Most colleagues have to communicate in the same foreign language. The native English speakers, on the other hand, have to put up with people sometimes making a complete mess of their language. My colleagues are also very patient with me.

Are you a different person when you speak French?

I can express myself more elegantly and more precisely in French, of course. In English, it always comes across as rather direct. But, actually, I am very direct when I speak French too.

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