Mugur Isărescu: The financial and banking industry, at a historical crossroads

• Regulation can only strengthen confidence to a certain point, but beyond that, it can even tear it down

• The credit relationship is a human relationship

The financial banking industry of Romania and of the entire world, is at a crossroads in its development, Mugur Isărescu, the Governor of the National Bank of Romania said yesterday, as he attended the 20 year anniversary of the Romanian Banking Institute.

According to Mr. Isărescu, confidence in the industry has eroded severely, and rebuilding it can not take place just through regulation, but it also requires the contribution of human capital.

The NBR governor said that never in the course of history there has been so much talk about ethics and professionalism like after the crisis which began in 2008.

Mugur Isărescu said: "The people who say that the losses of the banking system were caused by excessive freedom are right, but overregulation can also lead to loss of confidence. Regulation can only strengthen confidence to a certain point, but beyond that, it can even tear it down".

We are currently seeing a period of regulation, said Mugur Isărescu, who added that there are a lot of new institutions appearing, a lot of material needs to be read, which contain numerous abbreviations and hard to understand charts. "There should be training for this", he said jokingly. He said that bankers' professionalism would be a solution towards restoring confidence in the system. "I think that confidence depends on the quality of bankers", he said, adding that the credit relationship is a human relationship.

"Rebuilding confidence also involves the banker being a man of confidence", he said, joking again about the times when bankers who made mistakes would put a gun to their head.

Mugur Isărescu said that there is currently a lot of talk, and not without reasons, about the compensation of bankers and about morals.

Simon Thompson, CEO of the Chartered Institute of Bankers in Scotland, who also attended the event, agrees that there should be more emphasis placed on the development of human capital.

"We have focused too much on the financial market and too little on the second pillar, the human capital", he said. According to Mr. Thompson, it is not enough to rebuild capital, to reform regulations, to restructure banks, to reduce risk and to reform the compensation model.