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Acceptance speech for Bocconi Alumnus of the year 2020

Speech by Andrea Enria, Chair of the Supervisory Board of the ECB, for the nomination as the 2020 Bocconi Alumnus of the year

Frankfurt am Main, 16 October 2020

Ladies and gentlemen,

It is an immense honour and extremely moving to be named Bocconi Alumnus of the Year, although I would have been even more pleased had the ceremony taken place in person at Bocconi University itself. When I was told that I had been selected as Alumnus of the Year – news which I was delighted to receive - I could not help but reflect on what university life means to students, and particularly in my case when I was a student myself.

The first thing that came to mind although in actual fact it is always challenging to explain those ideas that come to you almost without having to think about them is the etymological meaning of the word university. As we all know, the word university comes from the Latin universitas, meaning whole, entire, or totality. And indeed, back in the day when we were much less specialised than we are now, the term Universitas studiorum referred to the teaching of all known disciplines, the entirety of all knowledge, because only by acquiring an overall vision of the world and by comparing a variety of different subjects could we attempt to explain the complexity of reality.

Things are clearly different now. Back then, by acquiring a limited amount of knowledge in relative terms, an individual could master a range of different subject areas. There was still a group of eclectic intellectuals, or to use a more appropriate term, polymaths, whose knowledge covered the humanities, but also more strictly scientific subjects as well as the arts and engineering.

It almost goes without saying that the Luigi Bocconi business school came into being with a different, more specialised vocation in mind, at a time when social sciences were becoming increasingly diversified and the study of economics and business subjects was moving away from the study of subjects such as philosophy or jurisprudence. Use of the adjective "business" therefore restricts the scope of application of the historical meaning of the word “university”.

However, although the approach to academic life has now become more specialised, the basic premise remains the same, namely research resulting from comparison and dialogue, interdisciplinarity, open discussion, debate and the exchange of different points of view and ideas.

Indeed, during the University’s early years, Bocconi’s illustrious professors included legal minds such as Angelo Sraffa, who was Dean for many years, and whose son Piero was one of the 20th century’s most original economists whose method of investigation was based on historical research and the analysis of the work of traditional economists, especially David Ricardo. This is something I learned to appreciate when preparing my thesis which then led me to continue my studies in economics at Cambridge University after graduating from Bocconi. These days, interdisciplinarity lies within what only a few decades ago was a single academic discipline such as economics itself, and which has now separated out into the study of business administration, political economics and finance, to name but three main branches; I could also mention the new area of political economics that right here at Bocconi has one of its most significant representatives in Professor Guido Tabellini, the author of pioneering studies in the field of the relationship between political institutions and economic growth, not to mention another illustrious Bocconi graduate, the late Professor Alesina, who was also a key contributor to this field.

All this is to say, that even when an academic institution specialises in a particular field, its role in research and in comparing a range of different disciplines and viewpoints continues to be what sets it apart and indeed constitutes its vocation. I am particularly pleased to see that the range of courses offered by Bocconi has diversified over the years, and that it now has its own law degree and also a number of specialist degree courses and doctorates in political science.

All this reminds me that when I started at Bocconi, to some extent I was not entirely happy with the focus given to business administration and law even for students like myself who would rather have concentrated on political economics and major policy issues. But yet, it was precisely those areas of study, and the extensive training I received during those years, that served me well when I started as a civil servant in the field of central banking and banking supervision. And I owe a great deal to Professor Lunghini who also recently passed away, since he was the supervisor for my thesis on the economic debate surrounding the Great Depression of 1929 which placed a particular focus on Sraffa and Keynes; he also encouraged me to start out at the Banca d'Italia and to combine my passion for academic studies with the vocation for hard work within the institutions.

Bocconi University was also where I first came into contact with the subject of European integration which has played such a great part in my working life. This was the time when the Single European Act came into being, following the Intergovernmental Conference under the Italian Presidency of the EU, which established the creation of the single market by 1992 as an essential objective for ensuring the economic and political progress of the European Community. As regards economics, the debate in Italy was centred around Bocconi University, with Mario Monti and Franco Bruni specifically playing a key role. European integration has provided a mechanism for the modernisation of our economy and institutions which could not be put off any longer. The independence of the central bank and the decision to proceed with a comprehensive reform of the banking sector - the "petrified forest” referred to by Giuliano Amato - formed an integral part of a project for national change which found its roots in the European project itself. The crises which we have been facing for years have also prompted critical reflections on these choices. But equally we should not forget the large degree of underdevelopment which these reforms have helped us to overcome. In particular, in the banking system a strong public presence and the politicisation of governance, the segmentation of markets to the detriment of competition, and institutional structures preventing access to capital markets did not create more stability. On the other hand, clear inefficiencies and distortions in the granting of credit were associated with frequent episodes of instability and public support interventions. But beyond the specific elements of the debate on monetary and banking policy decisions, the European vision which could be seen so clearly here at Bocconi in those years also involved a deeper cultural choice, one of being open to the world and seeking enrichment of public discourse with a view to making comparisons by drawing on other countries’ experiences, in the search for a common point of view.

The lessons learnt during those years were extremely valuable in terms of my subsequent professional experience, when my economics training had to be steered towards complex regulatory issues and put to use in making comprehensive changes to institutional arrangements, with banking regulatory and supervisory responsibilities being gradually shifted towards the European level.

In this area I was fortunate enough to be guided by another Bocconi figure, Tommaso Padoa-Schioppa, who was also the recipient of this award some 30 years ago.

In the introduction to his book[1], he suggested that e pluribus unum (or in English, one from many), the motto of the official seal of the United States – could also apply to the process of European integration. In fact, he uses it to explain the process of the formation of the European System of Central Banks but I believe it could also be easily extended to the whole process of European integration. This motto, in its medieval Latin meaning, refers to a process of unification starting from a wide range of diverse elements. Given its lengthy history and many traditions, Europe will always represent many diverse experiences and emotions.

But it is precisely this diversity, which must be recognised and valued, which can lead to a new unity which is not the sum of national experiences but a new dimension deriving from their coming together, defined in the founding treaty of the European Community as "an ever closer union among the peoples of Europe”.

At a time when the EU and its institutions are often the subject of criticism, I believe that attention should be paid to this essential aspect of European processes: the ability to make joint decisions and the ability to find common ground even when starting from very different positions. Unfortunately, the narrative circulating in the national media is always focused on what divides people, the extent to which final decisions are not satisfactory and to which national positions differ from each other. We lose sight of the enormous efforts made in order to listen to each other, analysing a problem in all its complexity and carefully considering all the solutions in order to reach the best possible decision, with the widest possible consensus. Undoubtedly the decision-making process involved is complex, and is on occasion not as responsive to events as it could be. But to my mind, our ability to create unity of purpose from diversity of opinion continues to be the strength of our Union.

This fundamental ability to create unity from diversity is all the greater when more informal forms of national policy coordination are replaced by the transfer of formal regulatory and decision-making powers to European institutions. Speaking from my own experience, the transition from the Committee of European Banking Supervisors (CEBS) to the European Banking Authority (EBA) and then to the Single Supervisory Mechanism established within the ECB constitutes very definite progress. At the CEBS each national authority retained substantial power to block a joint decision: as long as everyone was in agreement, there were no problems, but cooperation collapsed rapidly once the 2007-2008 crisis came along and decisions were all brought back into the national arena. The existence of differing opinions meant that a unified response to the crisis was not possible. Even now the harmful consequences of that inability to decide together are still visible, with the single banking market segmented along national lines.

The EBA was most definitely a step forward, with majority decision-making mechanisms and clear powers allocated directly at European level. But for several years now, the responsibility for direct supervision of banks has remained at national level, meaning that the speed and effectiveness of measures to strengthen banks’ balance sheets have been uneven from one country to the next. It is only through the banking union and by giving the ECB direct responsibility for supervision that real unity of action has been made possible. Diverse opinions and experiences are represented in all of our decision-making bodies, ranging from the Joint Supervisory Teams which the ECB coordinates but which also contain staff from the different national authorities of the countries where the bank is present to mixed inspection teams, right through to the Supervisory Board, which I have the honour of chairing and which maintains a strong governance over representatives appointed by national authorities – 21 of the 27 Board members with voting rights are in charge of national supervisory bodies. Very often decisions are taken by consensus, with no need for a vote. I would say that in almost all cases, the final decision taken is better than the initial proposal made because our Board genuinely operates as a collegial body, with everyone seeking to play their part in reaching a joint decision which best summarises the range of positions held.

This switch to European oversight also in the field of banking supervision has led to a quicker, more unified response to the crisis caused by the pandemic. We will undoubtedly make mistakes, but the fact that every decision is subject to in-depth scrutiny and intense internal debate is an important safeguard. The experience of recent months confirms Mario Draghi’s conclusion[2] that investing EU institutions with executive powers has proven to be superior to taking an approach based on a common set of rules.

As we all know, European integration is still a work in progress, including in banking. For years, the steps required to complete the banking union have been under debate, but reaching an agreement to take the necessary final steps seems to be a challenge.

The changing nature of the European project has long been one of its biggest strengths. It has allowed us to proceed with integration gradually, adjusting the pace to take account of economic needs, political will at the time and public support for change.

Fast-changing events, particularly in crisis situations, have often made it possible to make the most of the strong common interests that exist in a European Union able to respond to the challenges of the moment – what we would refer to as an ever closer Union. Nevertheless, there are historic moments when the incompleteness of EU institutions risks jeopardising the success of the European project. I believe this is true of the incomplete banking union.

Management of the last financial crisis at a predominantly national level has left behind a difficult legacy. The European banking system is still segmented along national lines. Reorganisation of the sector has not been as far-reaching as required, also because it was based on national interests and priorities, while the market had taken on a European dimension. Unlike other industries and countries, where the post-crisis reorganisation has benefited from consolidation on a European and global scale, many European banks have benefited from public support but are still without a sustainable business model. The excess capacity generated before the crisis has only been partially eliminated, and the sector still has very low levels of profitability. Segmentation of the safety net along national lines means that there is still a strong connection between the creditworthiness of banks and that of countries providing insurance for deposit holders. The fact that the spotlight focuses on national deposit guarantee schemes when there is a crisis is arguably a sign that the Member States still have legislative and regulatory barriers in place which prevent banks from operating in a truly integrated manner on their domestic markets, which would be provided by banking union; consequently, banks’ capital and liquidity are kept in national silos to provide a safety net for local deposit holders.

We are halfway towards completing the process, while the challenges are growing and the economic effects of the pandemic are on the increase. Against this background, the first two pillars of banking union, i.e. the Single Supervisory Mechanism and the Single Resolution Mechanism, will help considerably. But the process must be completed quickly through the addition of the missing components, namely the backstop for the Single Resolution Fund and a European deposit insurance scheme. When difficulties arise, only the knowledge that there will be a truly integrated European response will prevent a repetition of the mistakes of the past. This time we need to be quicker in tackling the quality of banks’ assets and more ambitious in addressing structural weaknesses in the sector at European level. The ECB is implementing all the measures designed to support the integration and consolidation of our banking system within the current institutional and regulatory framework. But this may not be enough.

The specific nature of this crisis, caused by an exogenous shock that has affected every EU Member State, has created the conditions to take this step forward. Unlike during the previous crisis, it is no longer a question of pooling resources to help banks experiencing difficulties – difficulties that were also caused by their inability to manage risk, poor management decisions taken and their unsustainable business models. It is in everybody's interests in every Member State to have a banking system capable of absorbing the losses incurred as a result of the economic fallout from the pandemic and of assisting businesses and households, which would also help to transform our economies towards more sustainable and technologically advanced activities. If national policies predominate again, because the safety net for banks will remain national, we will emerge from this crisis with a banking system that is even more segmented and inefficient than the current one. This will promote division rather than integration within the European Union. Some countries are in greater difficulty than others, but none of them will benefit from such an outcome.

I am pleased that Germany's EU Presidency is devoting considerable time and effort to completion of the banking union. The exogenous and symmetrical nature of the crisis triggered by COVID-19 has already made it possible to make significant progress. Following the compromise reached at the European Council meeting in July after four days of discussions between Heads of State and Government, European integration has taken a significant step forward. Some have compared this compromise to a Hamiltonian moment for the Union. But unlike when the United States was born, it will not result in a central body assuming existing debt. Instead, it will result in the issuance of common debt which will be distributed to Member States to implement development projects, leaving each one responsible for repaying the amount received. For the banking union, above all else it means laying the common foundations for managing future challenges in an integrated and efficient manner, not concealing previous losses, which in any case have already been recognised and managed within a regulatory and supervisory framework which is now truly unified.


This distinction from the Bocconi Alumni Community is of great importance to me. I like to think of it as being for all the Bocconi alumni who, like me, have used their studies to benefit institutions in Italy, Europe and around the world. I was very pleasantly surprised a few months ago when I took part in an event organised by the ECB and discovered how many fellow alumni I have as colleagues here in Frankfurt, although I shouldn’t have been. The training we receive at Bocconi offers the characteristics we look for in our staff: universality, openness and technical specialisation. I also like to think of this award as recognition for the many Italians who work in the EU’s institutions and have gone down this road also as a result of their university training, always mindful of and participating in the discussions about the European Union's development.

I would like to conclude with two points.

My first point relates to civil servants working in the EU’s institutions. I have had the pleasure of working with so many colleagues who have devoted themselves to their work with passion and selflessness, participating individually and putting their self-interest to one side to work for public institutions. I therefore look upon institutions as a force for change, as a result of the collective experience which continuously redefines the concept of common interests and drives our collective life. The European Union has been, and continues to be, the natural place to practice this notion of public service, serving as a laboratory for new institutional balances and acting as a non-violent revolutionary force, a "gentle force” so succinctly described by Padoa Schioppa[3]. I cannot resist a wry smile when Eurocrats are described as cold technicians far-removed from citizens’ best interests.

My second and last point is about the concept of loyalty among European institutions’ employees. Some say these employees should represent their national interests and support the positions of their respective capitals. I cannot deny that some national authorities may put pressure on them to do so and that some of them may have given in to this idea. I have a vivid recollection of the discussion I had with my superiors at Banca d’Italia when I was about to leave to take up my first position at the ECB the year monetary union was established. All of them made it clear to me that my loyalty should now lie with my new employer, in whose management Banca d’Italia also played a role. At the same time, they told me that they expected me to take to Frankfurt the knowledge and culture I had acquired at Banca d’Italia. The other lesson I learned there is that in the central banking world, good arguments count and should take precedence over national priorities. European loyalty, Italian culture and strong technical guidance: these are the principles that have formed the cornerstone of my work in Europe, and that I will try to pass on to my younger colleagues.

Thank you for listening.

[1]T. Padoa Schioppa, The Euro and its Central Bank. Getting united after the Union, MIT Press, Boston (Mass.), 2004.
[2]Mario Draghi, “Sovereignty in a Globalised World”, Speech at the awarding of the Laurea honoris causa in law by the University of Bologna, 22 February 2019.
[3]T. Padoa Schioppa, Europa, forza gentile, Il Mulino, Bologna, 2001.

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