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Move forward together

Move forward together

​Remarks by ESBG Presdient Fainé at ESBG Retail Banking Conference


Keynote address


Mr. Isidro Fainé, President, ESBG

​ESBG Retail Banking Conference

"Better Regulation for Growth and Jobs"

Brussels, 16 March 2016



Honourable Guests,

Dear Members  of the European Savings and Retail Banks Group,

Ladies and Gentlemen,  

Dear Friends, good morning

It is an honour and a pleasure for me to take the floor in this opening session of the 2016 ESBG Retail Banking Conference, especially because it is the first time that I address this annual event as. President of the ESBG.

This conference takes place in a very challenging environment for savings and retail banks. But perhaps just being a down-to-earth main street Banker is the biggest challenge of all today.

As we know, the confidence and trust of our customers has been on the decline as a result of the financial crisis.

Regaining this confidence and trust must be one of our main objectives: "Because if there is No trust, there is no Business".

And we can only regain the confidence of our customers if we are able to generate trust through:

    • Honesty

    • Professionalism

    • Empathy and

    • Dialogue.

We have to reactivate permanent dialogue with our customers. We have to be close to them and understand their needs, so that we develop and provide new and better products and services.

Better customer understanding enables better service, which generates:

    • Improved customer experience,

    • Greater client trust and loyalty, and

    • Eventually, increased revenues and more profits.


This is what will differentiate us from other banks. Proximity to our customers combined with excellent service must form part of our DNA.

This brings me to the main theme of this conference: Better Regulation.

In order to properly respond to the changing needs of our customers, we have to ensure that regulation helps us achieve our mission:

Which is to maintain very close and interactive relationships with:

  • The individuals,

  • The families,

  • The micro enterprises  and SMEs,  and

  • The Institutions that we serve.

Overall, European Regulators have done, and continue doing a very good job in creating a better and stronger regulatory framework  for the banking sector  in order to: 

  • reduce risk, and

  • enhance financial stability.

And the ESBG highly values the European Commission's initiatives on Better Regulation and its willingness to make amendments wherever necessary.

In this regard, we, the European Savings and Retail Banks Group, have responded to the Commission's "Call for evidence" and have provided arguments and data  regarding unintended consequences or inconsistencies between legislations.

Better Regulation should mean Proportionate Regulation: This principle has to be recognised and implemented at every step of the legislative process so that xisting and new regulations are applied proportionately to different banks.

The "one size fits all" approach does not work and harms the vital role of locally rooted banks as suppliers of banking services and financing to the real economy.

Differentiation should relate to, among other factors:

  • size,

  • business models  and …

  • ownership structures.

Such an approach would be very much in line with the purpose of the European Commission seeking to make EU legislation:

  • lighter,

  • simpler, and

  • less costly. 

We also need a level playing field so that the same regulatory framework applies to all competitors:  

  • saving banks,

  • commercial banks, and especially,

  • other financial institutions, such as fintechs and shadow banks.

(As you all know, Banks are much more than simple suppliers of financial products and services.)

Since the theme of this conference is also related to growth and jobs, let me briefly comment on the situation of the World and the European economy.

We are well aware of the market volatility our economies are currently undergoing. Nonetheless, moving beyond a short-term perspective, the world economic outlook remains positive.

According to our forecasts, and despite the turbulent start of the year, world growth will reach 3.4% in 2016 (compared to 3.1% in 2015).

Growth in advanced economies (accounting for 42% of the world economy) will maintain a reasonable cruising speed of about 2% during 2016-2017: growth will be slightly higher in the United State than in the Euro Area.

As for emerging economies, which account for 58% of the world GDP, we expect a gradual recovery from recent turmoil.

Of course, this positive view does not underestimate the existing downside risks, including the possibility that financial volatility ends up affecting the real economy.

However, it is important to remember that some key factors supporting growth will continue to operate over the following years: monetary policy will remain accommodative.  

(We could not have a better example of this than the measures the ECB took last Thursday.)

Last but not least, low oil and commodity prices will favour world output growth.

Let me now briefly mention some of the other big challenges, as well as  the opportunities  that we face.

I will start with the challenges:


First: Low interest rates

Interest rates have been at historical minimum levels for quite a long time now. This policy, although it may be desirable from a macroeconomic point of view, poses significant risks for the banking sector.

Some examples of potential negative consequences are the following: 

  • Low interest rates hurt savers, who are mostly elderly people whose number increases year after year.  

(Moreover, savings are a disincentive, especially long-term savings and pensions.) 

  • Keeping interest rates at such a low level for a long period deteriorates interest margins, thereby reducing bank profitability.  

This is especially true for local Banks that concentrate on the traditional activity of gathering deposits and providing loans to SMEs and Households.

(Finally, low interest rates increase the risk of creating new asset price bubbles.)

A second challenge is the need to generate more Fee Income through services and at the same time reduce Operating Expenses.

As you all know, banks today provide an increasing number of services to customers: 

  • standard banking products,  

  • advisory and investment services,  

  • multichannel and digital payments,  and

  • value added services  of various types,  such as:  

  • financial planning,

  • stock analysis,

  • budgeting management, and

  • expense control, among others.

​However, the provision of these services with the highest quality standards comes at a cost, which should be reflected in prices. 

Savings and retail banks with: 

  • large customer bases, branch networks, and

  • the latest technology and digital platforms are

(particularly well positioned  to enjoy scale and scope economies.)

These efficiency gains are passed on to both, consumers and investors.

​As for reducing operating expenses, the key decision involves: 

  • making our Head Office services slimmer and more efficient, and ensuring that the branch network  is a sales network  and not

  • an administrative burden.

​(If you do not have a wide range of services, you have no chance of surviving.)

Our third challenge is Fighting Financial Exclusion

2.5 billion people around the globe, around 20 million within the European Union, lack access to formal financial services  at a reasonable cost.

Financial exclusion affects the overall quality of life of individuals:

  • their patterns of consumption,

  • their participation in economic activities, and

  • their access to social welfare.

(One of the most effective means of promoting financial inclusion in Europe is, in my opinion, developing microfinance.

Microfinance facilitates access to basic financial services such as:

  • Loans,

  • Savings,

  • Cards,

  • Money transfer services

  • Or micro insurance.  

The beneficiaries of microfinance are typically:

  • Low income households,

  • Micro entrepreneurs,

  • Migrants and

  • Young people

 As you all know, the emigration and refugee problem is one of the key challenges of the European Union today, and microfinance could be a good instrument to fight it, (help them and make a stronger Europe.)

Let me take this opportunity to give you, in just a few seconds, a good example of the huge potential of microcredits.

To meet this need for microfinance, and based on my own experience, in 2007. I promoted the creation of MicroBank in Spain, as a "social bank", with the aim to channel microcredits to those social groups in need.

Today, MicroBank is a highly commendable success story.

Since its creation, it has provided more than 300,000 loans to individuals and families, amounting to almost 2 billion Euros, without any other guarantee than their "personal honour". 

It is worthwhile mentioning that the non-performing loan ratio of this business is very low. (2.15%, four times less than the Spanish average)

We have also found that microfinance is an extraordinary lever in creating jobs. According to a study  conducted by Microbank and Esade, the well-known, Barcelona Business School for each entrepreneurial initiative put forward  and supported by a microloan, in all, 2.6 new jobs are created.

Up to now, I have presented you with some of the major challenges we face. But as the saying goes "An optimist always sees an opportunity in every challenge".

And we are indeed optimists by nature, but of course with our feet firmly on the ground.

So, let me now talk about some of the main opportunities that lie ahead of us:

A first opportunity is: Digitalisation and the importance of Big Data

Digitalisation represents a great opportunity to change the way banking is done.

It is an opportunity to be even closer to our customers and to learn more about them by better usingthe capabilities of Big Data.

Digitalisation allows us to offer our customers a better, faster and a more targeted personal service.

​We have the best of both worlds: 

  • powerful branch networks and

  • advanced digital banking platforms.


(We have to create successful synergies between them and ensure that our customers receive the 247 service they expect.)

​By integrating the different distribution channels, we are able to offer: 

  • the right products  

  • to the right customer segment,  

  • through their desired channel,  resulting in overall cost savings  and  

  • an enhanced customer experience.

Physical branches will become less essential for processing transactions. But their importance will increase as they become centers of high-quality advisory and relationship-based services.

(I do not believe that retail banks will ever become "pure online" banks.)

Moreover, the smart phone has today become the smallest and most frequented bank branch, and it is critical that it becomes fully integrated in our multichannel strategy.

I think  that banking through Smart Phones,  is a very good example  of adapting  the traditional retail banking model  to the new social and technological reality  while meeting the needs  of the new digital generation,  the so-called "Millennials".

A second opportunity is: Customer Relationship and Proximity

As I have already mentioned, customer satisfaction starts with trust. We have to rekindle dialogue with our customers.

Having a good relationship with customers is not something we can gain overnight.  Professionalism in our work is a mixture of:

  • coexistence,

  • respect,

  • habits,  and

  • commitment.


(True dialogue with our customers is a necessary requirement of our times.)

It also entails putting the customer at the center of everything we do in the bank.  Focusing on the customer means focusing on the quality of customer service and making it a part  of the bank's core strategy.

To guarantee a high level of customer service we likewise have to implement a cultural change among our employees to ensure that customer satisfaction is a priority in our everyday service.

This implies:

  • training,

  • empowering and

  • motivating all employees throughout the bank. 

Let us stop spending so much time on reporting and bureaucracy, which only erodes our professionalism and affects the confidence our customers have in us.

 (In order to avoid this, Branch network employees should dedicate around 90% of their time to customer relations).

 A third opportunity is: to contribute to making SMEs financially strong so that they are able to have better access to capital markets.

In this respect, we welcome the European Commission's "Capital Markets Union" initiative. However, we also believe, that this initiative and our proximity banking model are complementary, because we know SMEs better than anyone else, and

(over the years we have developed a long  and personal relationship with them.)

 A fourth opportunity: I would like to comment on is Social Commitment

Since our banks are very close to the realities of households, SMEs and local communities, it is very easy for us to be aware of the true needs of society. Our social commitment is therefore an integral part of our mission.

​Whenever possible, one of our fundamental priorities should be to develop social welfare programmes.

We are proud to say that ESBG members devote more than 1.2 billion Euros annually to social and welfare programmes and of course this is apart from all the taxes that we pay. All told, this is a very significant amount.

(Nevertheless, I believe that we can do even better in the future.)

I would also like to make it clear, once again, that ESBG members have never stopped, in spite of economic downturns, playing a vital role as the backbone of regional economies.

We have developed innovative products and services to extend finance:


  • to SMEs,

  • households,

  • consumers,  and

  • all layers of the population.

In other words, to the real economy.

In my closing words I would like to quote Charles Darwin, who said: "It is not the strongest species that survives, nor the most intelligent. It is the one that is most adaptable to change."

This is especially true in the financial sector.

​Our environment has changed dramatically in recent years: 

  • technology has changed,  

  • the rules have changed,  

  • society has changed, and –most important of all–  

  • our customers have changed.

They are: 

  • more prepared,

  • more demanding,

  • more critical,  and

  • better informed.) 

So, in like fashion, we must change and adapt quickly and intelligently to the new circumstances.

 We must be:  

  • more prepared,  

  • more demanding upon ourselves,  

  • more critical of how we do things,  and

  • better informed.

Therefore, and in line with what I have just said, we, as true Bankers, must:

First, adapt efficiently to the new regulatory requirements, in a joint effort with regulators, to ensure proportional regulation and a level playing field.

Second, change the traditional product sales culture to a new customer service culture where the customer is the center of our strategy, not in theory but in practice.

Third, embrace and invest in new technologies and use them to our full advantage.

Fourth, attract new leaders who can identify, understand and manage new business opportunities and emerging risks, and keep pace with the changing financial landscape.

(Good leadership creates growth and growth creates Jobs.)

Not only can we do all that, but we can also remain true to the basic "3-R" Principle of the ESBG, which guides our activity as retail banks:

  • Retail banks with a

  • Regional presence and a

  • Responsible attitude  towards business and society; and

  • Allow me to add a fourth "R" today (Returns). 

Because achieving a suitable return on equity is critical to ensuring the continuity of our business model.

Let me also thank the European Institutions for their support of the ESBG and express my conviction that working together we can create the right synergies to clearly advance in the right direction.

As the classics say "What depends on us can always be achieved." Consequently, let us do it, and move forward together.

Thank you very much for your attention.


Proportionality; SME finance; Microfinance; Microcredit; Communication - institutional & commercial; Regulation; Supervision; Retail payments package; Digitalisation; Banking Distribution Channels; Banking Structure Reform; Banking Technology