The president of Banco Santander, Ana Botín, has advocated “refining” the resolution framework for financial entities and has proposed limiting the criminal and legal liability of banks that buy entities in a resolution process.

In an interview published in the European Central Bank (ECB) supervisory bulletin, Botín highlighted the fact that there is now a European crisis management framework that allows bankrupt banks to be intervened and resolved regardless of their size, so it would be the moment
to turn the page on the concept of “too big to fail”.

The directive has highlighted that the European system now has experience in resolving a financial institution, regardless of its size, and has given as an example that Banco Santander was the first banking group to participate in the resolution of a bank in the current framework, with the acquisition of Banco Popular.

“That’s not to say there isn’t more to do. There are opportunities to refine the system. I think the way that MREL instruments developed by subsidiaries can end up being discounted from parent companies doesn’t make sense. We also need to find a way to
establish total loss-absorbing capacity development targets for subsidiaries in emerging countries that reflect the longer implementation timeframes established in the Financial Stability Board (FSB) and Bank for International Settlements approaches,”
has pointed out.

In this sense, Botín has urged Europe to reduce the gaps in the crisis management framework using the lessons learned since its creation. The president of Santander has demanded liquidity support like that of the United Kingdom and the United States to “dispel the doubts of investors” and has appealed to the need to have harmonized insolvency rules.

Along the same lines, he has advocated making the alternative of selling banks in resolution to solid entities more effective and attractive, as was the case with Santander and Popular, limiting the criminal and legal liability of the purchasing bank for the actions of the previous managers.

In another order of things, Ana Botín has referred to the problems that prevent European banks from participating in cross-border consolidation processes. In this regard, she has recognized that the regulatory environment “significantly limits” the benefits that mergers between banks
from different European countries could offer on a large scale.

“In a way, banks have looked inward over the past decade to adapt to the post-crisis monetary policy and regulatory landscape, rather than outward to grow and expand. At the supervisory level, changes in treatment of capital
of Pillar 2 and the recognition of internal models, or a new approach to cross-border MREL exemptions, for example, would help support cross-border mergers,” he proposed.

On the other hand, the president of Santander has pointed to the fragmentation of the European banking market, with differences in the treatment of capital, liquidity or deposit taking between the different countries. In this regard, she has pointed out that the creation of a single banking market would be
the solution.

The directive has also stressed that the lack of a true single market limits the potential to boost the profitability and competitiveness of European banks, for which it has asked to develop an analysis of the regulatory burden faced by the sector that serves to
review and recalibrate requirements, including capital requirements.


Regarding the emergence of new digital competitors, Botín has explained that competition is good insofar as it promotes greater innovation and better service to customers, but has warned that it can create “walled gardens” controlled by the owners
of key infrastructure such as mobile phones, which in turn creates “captive customers” and would not be increasing the options from which customers can choose.

As he has warned, this situation generates new types of risks, blurs the lines of responsibility and can displace the provision of financial services outside the regulatory perimeter.

“Banks welcome competition in digital finance, as long as that competition is fair and benefits society (…). The basic principle should be ‘same activity, same risks, same rules, same supervision’ “, he insisted.

In this scenario, he has also called for a solid regulatory framework for crypto assets, which guarantees that all players are subject to the same rules. The president of Santander has pointed out that these open up possibilities in terms of payments, transaction costs, scale
and agility, although they create new challenges for banks and authorities in terms of a level playing field, systemic risk and transparency.

On the other hand, Botín sees it necessary to allow banks to be part of the development of cryptoactive markets. Banks must be able to compete in these new markets and offer their customers access to products and services in new digital ways, while maintaining the highest standards of compliance and risk management.

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