'Yes: especially because the regulatory regime is not quite stabilized yet. Basel III has of course been finalised, but they are still negotiating about the exact implementation within Europe. This creates confusion, which of course is highly uncomfortable for the banks.'
How do banks prepare for Basel III?
'Banks have been working hard. Not only will they have to hold more capital, but also better quality capital. This requires a change in the relative weight of different capital instruments, which raises a lot of questions. What is the best mix for our bank? What types of instrument can we issue and what is the right moment to do so? All banks face this type of questions. Each makes its own choices. Some banks plot their own course along the contours of Basel III. Others try to manage their capital as efficiently as possible and consciously stay near the bottom of the margins. With the risk, of course, that a slight change in regulations will force them to overhaul their entire capital position and capital instrument mix.'
What is the main focus of DNB?
'We look at how well-motivated the underlying considerations are and if they are in line with a bank's strategy and business model. Also, we gauge whether banks are on course to meet the 2018 deadline. Being the supervisor, we do not offer advice, but we do ask challenging questions. Are you sure your bank is doing enough? Are the basic assumptions valid? Banks have to estimate, for instance, how the European sovereign debt crisis is going to impact their capital planning. As their supervisor, we expect such estimations to be realistic.'
Has the debt crisis already made Basel III obsolete?
'No, I don't think so. In themselves, the requirements are adequate. For one thing, Basel provides a markup for unexpected stress. The supervisor examines whether banks' assumptions and starting points are prudent enough. And precisely because the supervisor takes a more distant view and sees several institutions, we sometimes notice things the institution has overlooked. Thus we help to identify the white spots. And about how to fill those in, I then enter into a dialogue with capital managers, risk managers and the management board.'
Enjoy the work?
'Yes. I've been in banking supervision for two years now. Before that, I worked as an interim manager. What I find most interesting are the discussions about how to meet the capital requirements. Complicated stuff, that is, and sometimes it takes long to find a solution. But when one is found, you really have achieved something.'