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Decisions and actions by the European Central Bank and the European Commission have stabilized the interbank money market, the manager of the Estonian branch of Danske Bank, Aivar Rehe, told BNS in an interview.
Estonian banker: Peace has been achieved on interbank money market
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"The actions and agreements in banking supervision, planned under the name of banking union, must reduce the risk of a next crisis. Based on the cyclical statistics of the economy of the past periods we should be expecting the next crisis in ten years, but we are not able to predict that cycle precisely now," Rehe said.
The planned banking supervision reform will change substantially the focus of supervision, with central management of monies to go under the control of the European Central Bank together with central risk management and supervision in the broad view. "That process has not arrived at the point of final agreements on all the political and banking levels, but it's moving at a good pace. It's a measure by which banking will be kept in balance," he said.
The key issues of supervision are sufficiency and liquidity of capital. "The issue of liquidity was solved in an urgent manner by the large cash injections of 2012. At the present moment banks are repaying their loans to the European Central Bank according to schedule. In the future the European Central Bank will get the powers to create rules which ensure both sufficient liquidity as well as sufficient capital adequacy," Rehe said.
The banker said that among the most important changes he saw a plan to effectively separate investment banking from retail banking. Legislators in Germany and the UK have already endorsed this, the goal being to better protect the customer against the systemic risks of banking, he said.
The head of the Estonian operation of Danske Bank said that while on the one hand the aim was to curb taking of risks by banks, on the other hand the changes were aimed at protecting retail banking. "It means moving toward more peaceful banking, which is less profitable but strong in a stable manner. With the said measures one is trying to reduce potential collapses in the banking system," said Rehe.