Conference Paris EUROPLACE x AFME - Introduction by Jean LEMIERRE

It's good to be with you. I think this is a very unique opportunity because it's a common joint work between me — we know very well, we have been partners for a long time — and Paris Plus, we know well. And I'm very happy, as Chairman of BNP Paribas, that the two of you cooperate, join forces on questions related to the market. I think it's also very unique we have so many participants, and I welcome that so many participants in Paris and elsewhere have joined the meeting. It's a good, positive signal about what we should discuss: securitization. It may sound extremely technical; it is. Lawyers, accountants, risk managers are going to share many, many views. But the bottom line of the question you are going to speak about is simple: how to finance in a more efficient way the European economy. And I'm very happy that the French Treasury has just joined at this time. The question is not about technicalities — there will be a lot of debates about this, I'll come back to technicalities — it is about how we finance the European economy. We have needs. May I mention two of them: digital, green. This is positive, this is massive, and it is the future. I say this because it's a clear signal to political leaders. Can we do it? Europe has plenty of money; we are a continent of savings, and we export savings. It's good. This is the freedom of allocation of capital across the world. But maybe we should find a way to mobilize more of the European savings for the European economies. Do we have the tools to do it? Of course we have. You have asset managers, insurers, and banks. Nicer word on banks... European economies have been financed by the balance sheet of banks for long, which is not the case in the US. After the banking crisis of the 50s and the 60s, the US decided to move to a more market-based system. In Europe, people speak about a more market-based system, but in practice, banks continue to have a big role. Good or bad? I'm used not to make a judgement because this is the way it is. My personal view is we should move more to a market-based approach, but whatever it is, we have to deal with the current situation. Banks have a crucial role to play, but we need safe banks. Safe banks — it's about capital requirements. Fine, we have increased them after the 2008 crisis. It's about banking supervision; we have improved with a more unified, eurozone-based supervision, which is great. But by definition, the balance sheet of a bank has a limit. The limit cannot be discovered. I look at the balance sheet of BNP Paribas; there is a limit. It's not strict, it's not a euro at a certain level of euro you need to stop, but there is a limit. Banks have a role to structure. They know the clients, they know the projects, they have the skills, the people, and with many partners — lawyers, friends — can team up to prepare and structure. And in my bank we speak about origination, but origination is not like finding mushrooms. That's why I always have doubt about the word "origination." It's about structuring; it's a serious job. It is not looking for something which could be hidden; it is to prepare, to make it sustainable, safe from a legal risk point of view, financial point of view, and ESG point of view. This is extremely important the way you structure an asset. Then we reach — you understand my point — we reached the point where we are today: should the asset stay in the balance sheet of the bank, or could it be shifted to people who have their job to originate savings and to offer new assets to asset managers and insurance companies? Not pension funds, because we don't have pension funds, but we have massive savings in life insurance in Germany, France, and other countries. So banks have a special role to play, and this is where we reach securitization. The missing point in the extremely good reform of the banking industry in Europe — I welcome the reform — is securitization, which is how to shift a well-structured asset to another investor. Not for liquidity reasons — that's a big mistake, and I'm sure you will have discussions about this — but for risk sharing. That's key. And this is fair, and this is exactly the way the US have done. That's the reason why their system is very efficient and, by the way, rebounds more quickly when there is a crisis, because the capacity to share the risk has been broadened to an extremely vast amount of savings. So I make it simple because it is rather simple in the understanding of the why and the how. Then I will finish by a question, and I will use a word which is slightly provocative but will be at the core of your discussions: in Europe, there is some kind of stigma on securitization. Where does it come from? Subprime. Terrible mistake. The management of subprime has created a stigma. At the time it was the visible part of the iceberg, and of course the key portion of the iceberg has been very efficient for the American economy. By the way, there was a mistake, and this mistake is haunting Europe. Never twice? Well, you know, if you engage with any political leader, maybe sometimes journalists, they will say, "Hey, you want to have the subprime in Europe?" I hope this meeting today will show that no, we can do better than the subprime. By the way, the Americans do better on a normal basis than the subprime, and you can do better than the subprime. That's the first point about the stigma. The second point is: it doesn't work. And we need to understand why it doesn't work. Because when I speak with many regulators, supervisors, they say you can do it, but it doesn't work in practice. There's none or limited, and probably less today than there was before. There is a reason. Is it culture? Is it regulation? Is it business model? Could be a business model, could be regulation, could be culture. So we need to go through this. And I know there are many consultations — the EBA has organized a consultation, the ECB has organized a consultation, which is very positive. And I hope this meeting today will help bring answers and show that we can do well. And I like the way it has been structured by Paris Europlace — that is the why — then concrete cases: what does it mean? What is the flesh? And then to go through some difficulties — maybe regulations, but maybe not only. Hopefully the debate will be very open on this question, to reach a conclusion which is: let's try to move. And I'll finish simply by one word: securitization, for me, is needed for the economy. It's also a low-hanging fruit for Capital Markets Union. We have a big European project: Capital Markets Union. I would support any initiative the two of you would take to open more discussion about how to deliver the Capital Markets Union. But there is an element I know we could deliver rather easily with a quick impact, which is securitization. And I say this because I would have a doubt about our common capability to deliver Capital Markets Union if we are not able to deliver a more efficient, well-functioning risk-diverse securitization. So thank you for listening, and I will read your conclusions with a lot of interest. Thank you.