Slawomir Krupa (Burgas, Bulgaria, 1974) has risen from a family of immigrants to become the top executive of one of the major banks in France, Société Générale, and the European Banking Federation (EBF) which includes, among others, the main Spanish groups. He himself asks to be interrupted if he speaks too much, as he declares himself "passionate" about defending European banking in this difficult phase of great need for financing at a disadvantage compared to the US. He grants this interview to four media outlets from the four largest eurozone economies. Representing Spain, EL MUNDO.
The global economy is being shaken by decisions going in all directions. How to define what is happening?
The new international environment brings significant disruptions. We have to adapt and navigate in a more volatile environment. However, the fundamental problem for Europe is our growth. Over the past two decades, we have fallen far behind most economies. I would like us to focus on this fundamental structural problem.
What does this refer to?
There is too much talk about competitiveness and not enough action. In Europe, we have focused too much on resilience at the expense of growth, and we need to shift our mindset towards resilient growth. This applies to all sectors and is especially true for the banking sector, as nothing can be achieved in the European economy without banks due to the central role of bank financing in Europe. Policymakers and supervisors should work to unfreeze some of the capital that is locked in the banking system to unleash growth. Discretionary supervisory measures have contributed to freezing hundreds of billions of euros of extra capital over the years, which amounts to well over a trillion in financing capacity. Banks can be the bridge to close the 800 billion investment gap in Europe highlighted in Mario Draghi's report.
Draghi says that banks are not prepared to finance such a radical transformation. Do you think European regulators should be more lenient with banks regarding capital requirements?
Draghi refers to the capital at the highest level of risk, funded with equity. Any significant expansion and growth require leverage and bank financing. However, none of us in Europe advocate for deregulation. But we have to address the overregulation within an extremely complex system of capital layers imposed on banks by multiple national and European authorities. This creates double accounting, complexity, and makes the system difficult to navigate.
What has been the impact of Donald Trump's presidency on the financial sector so far?
It affects us in two ways. There is more uncertainty in the system, and markets are more volatile. Our role is to navigate properly through a riskier environment and manage our risks well while supporting our clients. As we have seen in the results of European banks in the first quarter, this has been the case so far. There is also an element of opportunity for our sector, as clients need us more to process flows and for hedging products, for example. Secondly, macroeconomic conditions will be affected, with a slowdown in growth due to a pause in investment decisions, pending the outcome of trade discussions. The supply chain structure will evolve. All actors will adapt, depending on how disruptive the endgame is.
One consequence of this realignment in the U.S. could be a growing divergence in financial regulation. How should the EU react?
We should start by raising awareness. There are increasing signs that Basel III will not be fully implemented in the U.S., unless it maintains capital neutrality. So, how should we react to this in Europe? At a time when we are strategically thinking about our competitiveness, why would we choose to favor U.S. operators? Why allow significant divergences in the regulatory framework? Why force ourselves to drive with the handbrake on? It is also about strategic autonomy, reducing dependence on non-European banks, especially in an economy dependent on bank financing.
But European banks have proven to be more resilient due to higher capital requirements, while we have seen bankruptcies among some regional banks in the U.S...
I am not saying that resilience is bad, but it should not be the sole strategic objective. We need to adjust our risk vision. To be frank: seeking zero risk is death. There can be no growth, significant long-term growth, without taking risks. It's about balance.
Are you satisfied with Omnibus, the simplification initiative of the European Commission?
As far as I understand, the Commission considers it a first step. We need to go further and ensure that all regulations introduced serve a clear purpose, and in determining that, we must focus on resilient growth, not stagnation or the absence of recession. This is the mindset shift that is desperately needed.
The Capital Markets Union has been on the table for years. Do you think the new Franco-German duo, Friedrich Merz and Emmanuel Macron, could accelerate the discussions?
There is increased awareness of the need for more efficient capital markets in Europe. And I hope the two leaders consider the main point I am raising about capital requirements and the opportunity we have to further unleash Europe's potential. In discussions about the union of savings and investment, we often overlook the fundamental fact: Europe lacks investment capital. We can streamline regulation. We can even create another supranational regulator. But in the end, the problem remains: where will the money come from? since Europe only has a few pension funds, due to the structure of most retirement systems and also a cultural preference for liquid and low-risk investments. In the long run, it is about mindset, culture, financial culture, education... Before this, the priority would be to address the regulatory framework of insurance companies, as that is where part of the capital would initially come from, and on securitization. We have had 10 years of doubts. This tool can help accelerate the circulation of assets within the banking system, to help make the system more efficient - but this would not solve the capital issue.
Do you think it is fair that Société Générale pays less taxes than Santander, for example, because Spain and other European countries have introduced special taxes on the banking sector?
It is not my job to judge the policies of any particular member country. But, in general, discrepancies within an integrated economic area never favor competitiveness and growth, and we must never forget that banks also compete for investors.
What do you think of the attempts by the Italian government with Unicredit or the Spanish government with BBVA against mergers in the banking sector?
Once again, as President of the EBF, it is not my place to pass judgment or favor a specific market structure. In Europe, the duality between home country regulators and host country regulators remains unresolved, and there are still many capital inefficiencies for cross-border banking, awaiting the definitive implementation of the Banking Union. It is the responsibility of policymakers to address this issue and create the conditions for the single market to function, if that is the strategic intention. As a citizen, more than as a banker or as President of the EBF, I believe we must ensure that we create the right conditions for Europe to thrive through efficient integration.
There is another area of divergence: green finance. Should European banks stay the course in this area despite U.S. banks backing out?
I do not believe U.S. banks are backing out. They are adjusting the narrative, but I do not see any of them accelerating projects to build coal financing units. The reality on the ground is more nuanced. None of the European banks believe it is a matter of competitiveness. We all think it is a fact and the need for the world to finance an extraordinary amount of innovation, infrastructure, and renewable energy production capabilities. It is a challenge that we are very willing to support.
Banks have been questioning the financing of the defense industry for years. Is the situation changing?
Situations vary. Some banks across Europe have always been active, while others may have had some limitations in terms of their own policy or appetite. What has happened is simply the realization that Europe has a structural problem from the perspective of strategic autonomy. And the need to finance the sector has ultimately become a matter of existential importance in Europe.
Why have banks opposed the digital euro?
We never oppose a well-founded project, with a certain level of consensus on the objective. If the issue is the sovereignty of European payments, it is a critical issue. The level of dependence we face, returning to the question of strategic autonomy and the issues of dependence for Europe, is enormous. But I do not see why we should immediately jump through a very top-down approach to a particular solution that would not address the issue of sovereignty in euro payments. It is about transfers, instant payments, credit card systems... Let's explore all existing options and see which ones are the most cost-effective and user-friendly that we have on the table. Let's think about how we can interconnect these existing solutions and effectively address the real problem.
There is a huge public debt in the market from France, Italy, Spain, and perhaps the European Union itself due to the defense challenge. Can we expect European banks to continue buying this public debt?
Banks must make rational decisions. There are many arguments for banks to hold a certain amount of European public debt to invest their liquidity cushions. And then, each actor has their own reasons for what they do. But in the end, it is about rational risk management and this is very specific to each country and each bank.