The president of the European Banking Authority (EBA for its acronym in English), José Manuel Campa, has pointed out the challenge that the low profitability for the European banking sector, accentuated by the crisis of Covid-19, after the recent decisions of the Central Bank
European Union (ECB) suggest a low interest rate environment for more weather.
“In this crisis, as is often the case, the situation of difficulty does not eliminates the previous difficulties, but sometimes accentuates them “, has pointed out by the president of the EBA during his speech at the presentation of the ‘Observatory Report on Financial Digitization’, prepared by Funcas and KPMG.
In this sense, he recalled that the profitability of European banks it was already low before the pandemic and continues to be so, becoming negative even last year, in addition to the ECB announcements “Longer low interest rate outlook remains.” “Therefore
It is a challenge that has not disappeared, but quite the opposite, “he warned.
At its meeting this Thursday, the Governing Council of the ECB decided keep the benchmark interest rates unchanged for your operations and he assured that he will not raise them even if inflation exceeds the objective 2% on a one-off basis.
“Nobody wants to harden prematurely,” said the president of the ECB, Christine Lagarde, recalling past experiences of the central bank to warn that premature monetary policy tightening in the euro zone it could be “to the detriment of economic recovery”.
On the other hand, regarding the sector’s digitization process, Campa has indicated as the first risk from the supervisor’s point of view cybersecurity, although it has also pointed out the existence of a risk conduct in relation to how services are provided with the
“This is a new risk from the use of artificial intelligence (AI) and the massive use of data “, he explained, also adding the existence potential risks of exclusion linked to new skills digital.
“It is an area that worries us,” he pointed out in reference to the growing number of entities that begin to introduce AI mainly in the modeling of risk profiles and in commercial areas.
In this way, the president of the EBA has defended the need to apply the principles of clear accountability for results of the introduction of IA processes, as well as in terms of the “explicability of the algorithms “and of the modeling of the clients before potential
In any case, Campa has stressed that innovation is accompanied challenges, but also opportunities, although the transformation processes they tend to be more difficult “for those who carry burdens from the past.”
“Low profitability makes it difficult for many entities to advance in this and the investments, furthermore, may not be optimal with the size of the banks (…) From the competitive side, innovations attract new players “, he pointed out.
On the other hand, in terms of risks related to sustainability and ESG criteria, the president of the EBA recalled that the institution points out three major areas of work: governance and risk management, information and modeling, as well as risk sensitivity analysis and prudential requirements.
In this regard, given the risk of regional fragmentation at the regulatory, Campa has pointed out the difficulty of finding which forum is best suited for discussing these issues.