Reflections from a liaison organisation’s perspective

This is the short version, the full article can be found here.

It was the best of times, it was the worst of times. For over twelve years Michel Vermaerke stood at the helm of Febelfin as its CEO. In often stormy circumstances, he led the bank federation through the worst financial crisis since the thirties. Today, the world is in (relatively) smoother waters and Michel Vermaerke is heading for a new challenge, however not without looking back on over a decade at “his” Febelfin. “Banks play an essential role in society.”

Is the bank sector better or worse off than 12 years ago?

I think the bank sector is more in tune with the expectations of society and the economy. The household and company financing numbers reflect this perfectly. These numbers have made spectacular progress. In June, 215 billion EUR of outstanding bank credit was earmarked for households and 129 billion EUR for companies. In 2006, these numbers were at 127 and 85 billion EUR.

Are the challenges now different than when you started?

Entirely different. In 2005, the aim was to unite banks and non-banks in one federation and to have them speak through one voice. Over time, the financial sector would conquer international markets via this organisation. However, the crisis shifted the focus towards striving for a dynamic and sustainable sector that supports local economy, whereas the international agenda is now defined by each individual financial institution for itself.

Where do you place a bank in society?

The banks play an essential role in society. They are the oil of the economic engine. They provide oxygen by converting short term savings into long term credit and by shouldering the related risks. The banks also control money transfers, which is just as essential to keep society going.

Do they have even further reach?

The question is whether the banks can take on even more responsibilities. Febelfin has always advocated an open conversation on this subject. After the crisis, we really listened to people and their demands for understandable information. As a result, the awareness campaigns for safe internet banking came about, reaching millions of people.

You were also there at the start of Febelfin Academy.

I am quite proud of how Febelfin Academy turned out. Before, it made a loss, it had no future, and was not suited to the demand at the time. Ten years ago, we split off Febelfin Academy in a separate non-profit association with its own management and board. Today, Academy organises training courses every day and reaches a large number of people, also increasingly more people from outside the financial sector. Because let us be clear about one thing: in society – and definitely in the financial sector – training is an absolute must.

Has Febelfin evolved enough and is it ready to face future challenges?

An institution should always adapt. It is clear that we are currently closing an important chapter: the immediate changes after the crisis. I feel we should not forget the lessons learned from the crisis and humbly bear these in mind for a while. But society evolves: there is the boom of the sharing economy and the digital revolution. This will change everything. It requires a tailored approach, but the organisation as such is ready for that. It is up to the members to determine a common strategy. They can count on the staff of Febelfin: a mix of fresh dynamic and experienced knowledge.

In Belgium, the financial sector is close to the general public. Will this continue to be the case?

I think so. Belgium has always been a pioneer when it comes to electronic and card solutions. Digital evolution is spreading quickly. I hope that investments continue and solutions are found at sector level, as was the case with Isabel and Bancontact. Education on digital applications is just as important. Together with Gezinsbond and other partners, Febelfin committed to offer digital education tailored to seniors over 55, such as me (laughs). We should not lose sight of the people that are not up to speed on digital evolutions. And it is my hope that the financial sector never will.

Privacy is also a worry in the digital world.

It should be. The financial sector should give the consumers confidence by treating their data carefully and conscientiously. Unlike the Googles and Facebooks in this world, banks have a long past in client data discretion. There is a study that examines the level of confidence people have in the way banks treat their personal data as opposed to Facebook. The banks scored over 80%, whereas Facebook did not even score 10%. That says it all.

What about the emerging fintech companies?

The Belgian financial sector has always been a pioneer in financial technology. Now we have B-hive, but there are several young and not so young companies that also come up with attractive solutions. Solutions that can be rolled out not only in Belgium, but in Europe or worldwide. It is nice to see how technology and finance have found each other. For this reason, we should give starting entrepreneurs every chance possible. It is an opportunity for the banks to get involved in fintech and to reinvent their own models. For Febelfin as well.

A lot of legislation is driven by Europe. Is a Belgian banking federation still necessary?

Yes. First and foremost, a lot of local distinct aspects are at play. Take for example the housing market and how the risks on that market are being financed. They can be as different as night and day, depending on the country. Secondly, a lot of consumer matters are tied to a local culture and feeling. Thirdly, you have local fiscal regulation, much of which is still determined by the Member States. Social dialogue or payments are almost never regulated at European level. Besides, it is an illusion to think European decisions are strictly neutral. Europe as well must seek balance and in some cases, a large country will carry more weight than a small country. You should let your national voice be heard at European level.

Would this happen more often if Belgium had a stronger concertation model?

I am impressed with the Luxemburg model: unity and shared vision between politics, government and financial sector. Clear and distinct priorities. Unity of action. Healthy level of common promotion. Their slogan is: “It’s not because we are small that we have to think small”. I think we should not add to policy fragmentation any further in Belgium. Nor can we force ourselves into the kerb of the maze of rules, albeit well-intended, but makes you wonder at the end of day: where is the consistency in this policy?

Should the bank sector play a part in tackling government debt?

Since the crisis, Febelfin has always tried to be an accessible partner to the government and to help it face its challenges. During the first years after the crisis, this led to a bank plan in Flanders and a financing plan in Wallonia, but also in the assisted closings of Ford Genk and Caterpillar. This kind of cooperation with the government can definitely be extended to debt management and the ever-present budget difficulties.

How do you rate the bank law?

After the financial crisis, lessons needed to be learned from what happened in Belgium. These lessons were translated into a strict bank law. An admirable attempt was made to limit risks, while maintaining the freedom necessary so that banks could continue to fulfil their essential role in the economy. A balance was sought that still deserves to be defended.

What do you expect from Brexit?

It has now been about a year after the wisdom of crowds and I find that GNP growth in the UK is stagnating. Brexit will be a challenge for everyone, but whatever agreement may be reached, it will never be as good as the existing free trade agreements. Over time, Brexit may lead to new competition dynamics. Hopefully, this competition will be a healthy one and not one that creates its own problems later. What is certain: Brexit is forcing our country to reflect on its positioning against the UK as well as the rest of Europe. I strongly believe in e pluribus unum, out of many, one. You are always stronger when you can find unity in diversity. If that principle starts to shake, you should watch out. And the outside world picks up on this immediately.

You have held many positions in non-profit and cultural organisations. Did this help you at Febelfin?

Absolutely. During and after the crisis, this involvement helped me sense how to communicate with politicians, NGOs, civil society... The cultural sector is extremely sensitive to societal change. They feel change coming 3 to 5 years ahead. If you follow the cultural sector, you can predict where we are heading. It has taught me to look “outside-in”. Febelfin is an outsider to the banks and financial institutions, because we are neither. On the other hand, Febelfin is an outsider to the general public as well. This makes us naturally suited for building a bridge between both worlds. However, this also requires an ability to empathize and to not follow one single vision.

What lessons did you learn specifically during 12 years at Febelfin? 

More time and attention should have gone to public opinion. Especially at the time of the bank tax, a lot of effort went into resolving internal conflicts that left everyone feeling like the losing party. We should have listened more to our members and non-members, besides other cases at the time.

Do you have any words of wisdom for your successor?

Be yourself, but be wise enough to listen empathetically. Look for compromise and balance. Be involved in what moves society. Respect people of all functions. Support your people. Make sure you and the president make a good team. And most importantly: never lose your sense of humour. Sometimes, a witty remark can fix something quicker than talking for half an hour.