Do you expect there to be further consolidation in the world banking industry ?
Lévy-Lang: Yes, but not because of the usual assumption that bigger banks are better banks but because there is an oversupply of banks in the world and that it is cheaper and politically easier to merge than to liquidate a bank…
Will there be large-scale cross-border – as well as domestic – bank mergers?
Lévy-Lang: Yes, in spite of the limitations in cross border synergies in banking.
Do you see banking consolidation putting any downward pressure on professional salaries?
Lévy-Lang: On average yes, but who wants to hire an average banker? There will be more differentiation in professional salaries, with a premium for specialists.
What is a bank?
Lévy-Lang: A bank is a regulated institution which collects deposits from the public. All the other functions performed by banks can be performed as well or better by non-banks (and they often are…).
As securities markets continue to grow worldwide, is there a future for bank lending to companies?
Lévy-Lang: Yes, because all risks cannot be repackaged and sold to investors, and there will always be a need for direct lending, if only as a bridge to the securities market. But mastering both types of intermediation will remain the major challenge for banks.
How important will the securities business be to your bank in the coming years?
Lévy-Lang: In the new Paribas structure, the securities business represents approximately 20% of our revenues and profits. This should remain more or less true in the future, barring a major acquisition.
How important is it for your bank to expand in non-banking areas such as insurance and asset management?
Lévy-Lang: We have been in specialized life insurance for the last 24 years and expect to expand this business, as well as other asset management businesses, by internal growth and specific acquisitions. It is an important factor in our value creation plan.
What or where is your bank’s biggest risk?
Lévy-Lang: Division of risk and using a risk adjusted allocation of capital means that we cannot isolate one risk as the biggest. They are all big (or small, it depends on the yardstick..).
How important will proprietary trading be to your bank going forward?
Lévy-Lang: It will remain a normal part of our business, but will account for a minor share of our revenues.
What is the most important qualification or quality needed to be a bank CEO? Do you see this changing in future?
Lévy-Lang: Would the first question be meaningful for a ceo in any other industry? I don’t think so. Beyond the qualities expected of any ceo, I believe the main change will be that bank ceos will have, in the future, to be more capable of adjusting to a fast moving industry, and more open to non-banking experiences and information. Banking will never again be a club for bankers.
What do you worry about?
Lévy-Lang: The risks I have not identified, and the quality and motivation of our key managers.
How important is it for a bank CEO to have an intimate understanding of derivatives and risk management?
Lévy-Lang: It is essential, and it is more a question of common sense and logic than expertise in advanced mathematics or financial analysis.
How would you like to see the regulation and supervision of banks improved?
Lévy-Lang: More international cooperation between bank regulators and supervisors, but also more focusing of supervision on the two key issues which are the safety of depositors and savers and systemic risk. The regulatory framework should focus on the function (deposit-taking for instance) more than the institution which performs it.
How will the introduction of the European single currency affect your bank?
Lévy-Lang: A relatively small short-term cost, a tremendous opportunity for development and eventually a competitive edge with a large securities home market, comparable to the us domestic market.
Why have banks been much more profitable in the 1990s than they were in the 1980s? Will this continue ?
Lévy-Lang: Because of the decline in interest rates, the steeper yield curves and the global monetary expansion. Volume and boom markets create many geniuses…. It may not last into the next century.
How will technological developments change the shape of commercial and retail banking ?
Lévy-Lang: Drastically. The very concept of a retail bank may eventually disappear to be replaced by specialized, nonbank suppliers of retail financial services. In commercial banking, I expect more integration of lending and securities-based services.
