On Thursday September 24th 2015 we held our Club Delville breakfast with Séverin Cabannes, Deputy CEO of Société Générale being our guest speaker. On this occasion, he addressed the issue of new paradigms in the banking industry. Please see below the summary of that event.
The new paradigms of the banking universe »
« Being a bank manager today comes close to being involved in interim management, if I may judge by the path of my European colleagues. Fortunately, there is more stability in France”, smiles immediately Séverin Cabannes, Deputy CEO of Société Générale, the oldest French bank which has never changed its name. After a distinguishing career in the industry (Elf-Aquitaine Group) and in the services’ sector (Steria), Séverin Cabannes landed at the so called “SocGen”, in 2007, and was delighted, at the time, to reach a high growth sector, with great perspectives. « I arrived in the middle of the subprime crisis and the global financial-economic explosion going off. Since my arrival in the bank, I had to manage the crisis ». According to Séverin Cabannes, the most severe economic bankruptcy since the 1930s is the result of an overly indebted world of economics that cut out the worldwide economy. 8 years later, how is it going? « Despite historically low interest rates, global economies have showed largely insufficient growth rate, which affects by definition the activity of banks whose mission is to finance the economy. Even if in the euro zone, we have recorded a slight activity rebound in recent months, growth perspectives are still largely insufficient”.
Doubling its own funds
In an attempt to provide an appropriate response to global financial disruption, international monetary authorities have developed rules that some consider as being sharp, to stabilize the banking system (Basel Committee Basel 3). Among the measures recommended by this committee, which bring together the largest central banks, there is the requirement to double the equity. « This mechanically reduces by 2 the profitability of these, which is very damaging for the competitiveness of our banks« , declares Séverin Cabannes. Other paradigms inherited from the crisis, the banking industry is facing an increasingly significant phenomenon being the use of disintermediation to finance the economy. In other words, the gradual arrival of players who are not coming from the banking industry, mainly the financial markets, a trend at work for many years in the United States. Moreover, like his colleagues working in banks, Séverin Cabannes laments the high volatility of the banking regulation which prevents banks to set up real long-term and sustainable strategies.
The Digital Shift and Transformation
Another new paradigm which deeply affects the banking industry, like other sectors of the economy is the digital transition. « Société Générale devotes great energy and resources to this shift. This revolution changes the entire banking system. Everything is changing: making contact with customers via the Internet, the building process of banking products (speed, interaction). Organizations that will be too hierarchical and not open enough in their functioning system, will be distanced or will disappear”, he says. Another new danger again pointed by Séverin Cabannes, is the inflation of banking fines, particularly in the United States and in the United-Kingdom. « We have implemented many compliance officers within our organization in order to be in full compliance with the rules. » Facing the new norm in the banking industry, Société Générale intends to remain faithful to the model of « universal bank » (retail banking + finance and investment banking + asset management banking), which has proved its efficiency. Amongst the major challenges banks are already facing, Séverin Cabannes dealt with the access to data, with clients’ payment data, a highly valuable type of information”. In addition, banks need in their traditional mission of financing the economy, to strive to focus on the most virtuous projects, environmentally speaking. To conclude, Severin Cabannes and the Société Générale General Management are well aware of the importance of investing resources to re-establish a good image of bankers which has been undermined since the subprime crisis. « We must be attractive to attract the best talents and together build the bank of tomorrow ».