BANKS - "TWO VISIONS" "A clearer strategy would provide a boost to the entire economy"

Reporter: Citizens are increasingly wary of using banking services, which is already visible in opinion polls, as well as in the activity of banks. What do you think the banking system can do to regain the trust of the population?

Steven van Groningen: In reality, the numbers concerning the number and volume of trades conducted through banks show other things as well, some of them the opposite of what you are stating. I agree that there is a drop in the population's trust, or perhaps it would be more correct to say of the population's optimism when it comes to the banks, but that is on a very general level. If we look at the trust that clients have in their main bank, what we see is that it increases in the case of some banks, and it decreases in the case of others, depending on the way their services are perceived.

In other words, we are complaining generically about the banks, but I think that many of us appreciate a good service that helps us directly in our day-to-day activity.

I think that there are several reasons why confidence, or like I was saying earlier, optimism on a general level has decreased; they are objective causes, which are independent from what the banks are doing, but they depend a lot on the performance and economic situation: people earn less today by perhaps working more than they did before 2008 and they don't have the certainty either that they will have next year the job they have today. If they have to repay a loan that hasn't gotten any cheaper, but has actually gotten more expensive -either because the exchange rate had a negative evolution, either because the financing sources have gotten more expensive, or because of both - how can they be pleased? It is understandable that if you're going to blame somebody or something, the first thing that comes to mind is the bank, because for most families, that's where most of their monthly earnings go to. It is a situation that exists not only in Romania, but in many other countries as well.

We have a duty to try to understand the situation of every individual customer and try to provide them with some alternatives. But they need to be willing to cooperate with the bank. I know situations where people end up in foreclosure and they go into hiding. Or cases where some people conceal their income and only report a small portion of it to postpone the repayment of the loans.

Unfortunately, problems don't go away if we pretend they don't exist. It must be said that the expectation that the bank would just make loans cheaper across the board is unrealistic, because the money that we borrowed comes from the customers as well, it is the money from deposits, which we have to return on maturity, with the agreed upon interest, even as attracting financial resources has become more expensive for Romanian banks.

At the CPBR, our priority is to promote transparency and simplification of the relationships with our customers; and also dialogue with all the interested groups - regulators, consumers - we hope it will help us overcome this deadlock.

Reporter: What do you think the new banking model looks like?

Steven van Groningen: I will answer this question as a banker and bank executive, not as a president of a professional association: there won't be a single banking model, meaning that there will be banks that will continue to pursue the universal bank strategy - in my opinion, five at most in Romania - and banks that will specialize, or niche banks. From this point of view, I think that customers, whether we are talking about people or companies, will be able to opt for what suits them best. I am currently seeing that the majority of the customers is focusing on costs, but on the other hand, there is no point as a customer in paying low fees for services that don't solve my specific needs. Another characteristic will be that banks in general, will increasingly adopt the new technologies and I think that this trend will be another great gain for customers, because banking services will become easier to use from anywhere. Personally, I favor the use of cash as little as possible, because electronic transactions are easy to do from anywhere, they cost less, they are safe and they can be tracked.

Reporter: How many members does the Banking Professional Association currently have, compared to the four members it had at the time of its creation?

Steven van Groningen: The (CPBR) currently has six member banks, after ING and Volksbank joined its founding banks BCR, BRD-Groupe Societe Generale, Raiffeisen Bank and UniCredit-Tiriac Bank in July.

The six banks that the CPBR currently has as members hold almost half of the assets of the Romanian banking system, and their employees represent more than one third of the total number of employees in the entire banking system. But even more important, there are already banks that are represented which have invested a lot in the Romanian banking infrastructure and have therefore made a long term commitment to the Romanian market, to the Romanian customers. As we have announced from the very beginning, the organization is open to any bank that adheres to the principles and objectives of the CPBR, specifically the real improvement of the business climate, of the relationships with its employees, with its customers and the authorities, taking into account the real desire to improve the efficiency, transparency and thus the credibility of the banking sector in general.

Reporter: What is your opinion on the relationship between the Banking Professional Association and the Romanian Banking Association?

Steven van Groningen: I would like to once again clarify an important aspect, to avoid any misunderstanding: the CPBR has not been created to represent an "alternative" organization or a "replacement" of the RBA, as has been speculated, but one that is complementary to it. That is precisely why we have clearly presented ourselves as a professional association, from the very start. The two organizations are complementary, and the relationship that we are promoting is that of mutual support when it comes to issues of common interest. Also, the CPBR member banks are members of the RBA as well, and they actively participate in the discussions and the actual work of the specialized commissions of the RBA.

Reporter: What can you tell us about the relationship that the Banking Professional Association has with the unions in the banking system, given the numerous restructurings that have occurred?

Steven van Groningen: It should be said, first of all, that we are a young organization, which has only been born recently. So we are ourselves going through a learning process and one for seeking the optimal options for dialogue and for opening these communication channels with the unions, with our employees, with the authorities, with the market. As for social dialogue, we are open to starting the dialogue with the employees and with the unions. But an important remark must be made: what we are mostly interested in is increasing the social dialogue not in terms of it happening at any cost, but in terms of its quality or efficiency. It should be understood that we want the dialogue we want to increase the efficiency and the quality of the results at the level of the banking system. We will try to be reactive and to be as representative as possible, by adding new members, as well as the unions.

As you know, the unions in the banking system have praised the creation of the CPBR as well, precisely because both parties felt the need for a real dialogue, by ensuring representation from both parties. There are issues that concern improving the professional standards in the banking system and defining a professional reconversion environment, because indeed, the economic outlook in the medium term, as well as the new technologies are putting pressure on the number of jobs in banks.

Reporter: What are the challenges / priorities of the banking sector which the Professional Association of the Banking sector is watching?

Steven van Groningen: We are definitely talking about the issue of social dialogue and the professional standards of the industry and the issues which are on the consumer's agenda and the real dialogue with them. Concurrently, we will strive to improve the level of financial education, as well as to improve the regulations which create a lot of red-tape for banks, with the goal being increased operating efficiency and in the end, the cutting of the costs of banking services.

Reporter: What were the measures which the Professional Association of the Banking System promoted in order to diminish the volume of non-performing loans in the system?

Steven van Groningen: In terms of non-performing loans, every bank has a different situation and thus, a different strategy. It has to be said very clearly that the CPBR conducts its activity in compliance with the competition legislation in effect; no aspects that deal with the strategy or the commercial tactics of every bank are discussed by the Professional Association; we are very strict in that regard.

The aspects we will be discussing at the level of the CPBR concern, first of all, improvements of the various regulations, including those that could have a positive impact on the quality of the balance sheet assets in the banking system.

Reporter: What is the position of the Professional Association of the Banking Sector concerning the issue of abusive terms practiced in the domestic banking sector?

Steven van Groningen: First of all, I think we should stop looking at this issue superficially. "Abusive" is a term that is thrown around rather abusively - If I am allowed this play on words - when discussing this issue.

There are clauses that are disputed by some customers of some of the banks, and it is their undeniable right to talk to their bank and if the result of these bilateral talks is considered unsatisfactory they should go to court. It's only the court that can decide whether certain terms are "abusive" or not. In that regard, experience shows that one problem is that courts render diverging decision in the same case. It is rather difficult for consumers, as well as for the banks, to learn together what the behavior to follow would be, when court rulings are contradictory. The only ones who stand to gain from that confusion are lawyers. I am convinced - and my colleagues on the Board of Directors of the CPBR are behind me on this - that there have been cases of abusive terms in some of the banks' contracts. It is clear that this kind of clauses have to be eliminated. It is however completely harmful to suspect that as being deliberate on the part of the banks - who are treated by default as "big" and "mean" - as if they had knowingly introduced a clause to cheat their customers as a working rule. Such a claim is completely untrue and once again, it's only some lawyers that stand to gain from promoting such an conception. In reality, we have things to learn along with the consumers; I can tell you that the bank I am leading is changing its products, procedures, workflows, based on the suggestions or complaints from the customers. And the same thing is happening in other places as well ...

On the other hand, I think that a real problem comes from the complexity of the contracts; I think that the role of the CPBR when it comes to the consumer agenda is to improve the transparency and simplify as much as possible the documentation, in the relationship with the population. In spite of the numerous legal requirements which make banking activity an incomprehensible maze for people on the outside, we have a duty to make the effort to "translate" this labyrinth ourselves, to make it comprehensible to everybody. It is a very important element for restoring the confidence of the population in banks and that is why we are trying to dialogue with the authorities to limit, and wherever possible eliminate, the contradictory aspects that currently exist in the legislation in effect.

Reporter: What is your opinion on the decision of the National Consumer Protection Agency to have commissions displayed on ATM screens?

Steven van Groningen: We think that the initiative is good when it comes to transparency, but it needs serious modifications to make it possible from a technical and legal standpoint, and in the end make it useful and advantageous for consumers, including in terms of the costs. According to the specialists of the banks that are members of the CPBR, a rather low number of requirements sketched in the draft order seem feasible, but within a far longer delay than the one requested by the authority, other seem practically, legally or commercially unpracticable, for reasons that concern the competitive market, changes in the IT and communication systems with other entities. In that regard, we have repeatedly requested consultations with the ANPC and we hope that they will take place within the briefest delays, with the mentions that they should be very serious consultations, especially since we understand that the draft Order is not based on an impact study or objective research of the sector.

Reporter: What is your relationship with the Central Bank like?

Steven van Groningen: The National Bank of Romania is one of the important stakeholders in any relevant initiative at the level of the industry and besides, it is the traditional dialogue partner of the banks; I think it needs to be said that even though, over the years, commercial banks had different opinions from those of the Central Bank, the consultations have continued. In my opinion, the National Bank is a model of good practice when it comes to dialogue, which it would be a good thing if other regulators followed.

Reporter: How can lending resume? What do you think are the sector where loans can still be given out?

Steven van Groningen: I will now answer you as a bank president more than of a banking professional association and I will tell you from my experience that the general discussion about the lending to one sector or another gives us a superficial image of the economy. What is happening is - and the banking industry is no exception - that we have performers in every branch of the economy and it is normal for them to be the beneficiaries of loans for development; but we do have many others that were only performers when the economy was growing. Sure, if Romania had a clearer economic strategy and it focused its public investments in a European context on multi-annual priority projects, that would provide a boost to the whole economy. And I think that it is the thousandth time that I say this, fiscal and legislative predictability, reducing tax evasion and corruption would create more confidence among Romanian and foreign investors.

In the end, we need to become aware of the fact that there is a competition for resources between many countries and, if you will, the question is not what sectors deserve to receive loans or not, but rather, which countries are worth investing in or not. The fact that Romania still relies 100% on loans for development is not a good thing, because it is not a sustainable model in the long term.

Reporter: Are Romanian banks ready to join the European Union?

Steven van Groningen: It is an adaptation process which the Romanian banks that are subsidiaries of some international groups are certainly a part of, and thus ready for it.

Reporter: What is the attitude of the Professional Banking Association towards lawyer Gheorghe Piperea, given that there are banks, which are among its founding members, that are refusing to have any dialogue with the lawyer in question, and even actually boycott events that he is attending?

Steven van Groningen: Under no circumstances does the CPBR exclude a profession or an individual by default and as far as I know, all banks have a professional dialogue with law firms that represent clients. Beyond these aspects, every bank decides according to its own strategy as to what events it will attend.