The 3 keys to success

However, the financial sector can only perform its core tasks optimally to the extent that three keys to success are present:

  • Banks must be able to enter into open dialogue with all stakeholders.
  • Banks must be able to maintain an adequately sustainable profit model.
  • Society must remain realistic in the demands it places on banks.


The past has taught us that a healthy dialogue is possible and that good results can be achieved through this dialogue. The voluntary moratorium on the marketing of particularly complex financial products concluded voluntarily between the financial sector and the regulator (FSMA - Financial Services and Markets Authority) in August 2011 is a striking example of this.

The framework for socially responsible saving, investment and credit provision from 2012 (see is also the result of constructive dialogue with NGOs and public authorities, just like the care programme set up for Ford Genk, ArcelorMittal and Caterpillar.

That care programme came about following the announcement of the closure of the Ford plant in Genk, and was extended when the restructuring of ArcelorMittal and Caterpillar were announced. It maps out the financial and social impact of the companies involved and their suppliers so that financial institutions can search for a suitable solution together with these companies. In addition, the care programme must make everyone, including those who do not work for Ford Genk or ArcelorMittal, aware that they can talk to their banker if they have financial problems.

The care programme was a textbook example of constructive dialogue between the sector and the authorities, which also quickly yielded tangible results for the customers concerned. However, the fact that a lack of dialogue can also have unintended adverse effects was made clear with the regulation on the additional withholding tax on savings income (the so-called 21+4%). That regulation, which has since been replaced by another, cost the financial sector a great deal of extra IT investment. The financial sector is convinced that solid dialogue can avoid such problems in the future

Sustainable profits

The financial institutions have worked hard on their liquidity and solvency positions in recent years and the balance sheet total has shrunk by 27.1%. Core Tier-1 capital grew by 16.6% and the leverage ratio between equity and the balance sheet total fell by 38.7%. The extent to which banks are dependent on financial markets for financing their balance sheet fell by 30% over the same period. Our banks have thus become stronger and more solid.

However, care must also be taken to ensure that financial institutions continue to generate adequately sustainable profits. Specifically, a certain level of return on equity is needed to further strengthen the balance sheet and continue to finance the economy, in times of both limited and high economic growth. After all, some of the profits will have to be set aside to strengthen the balance sheet, and some to remunerate shareholders.

The quest for greater stability of the banks and the financial system should not lead to an excessive reduction in financial institutions, as that would have a direct impact on the added value of the banks and the extent to which they can meet the demand for lending. From this point of view, an effort must also be made to allow financial institutions to generate adequately sustainable profits.

No one in the sector is trying to go back to the returns of before the crisis, but going to the other extreme is just as unhealthy. A sustainable and vigorous financial sector must be solvent and liquid, but also profitable. At the same time, profitability is not a goal in itself but rather a way of allowing financial institutions to fulfil their core tasks and continue to finance the economy in periods of low and high economic growth.

A sector whose regulator rightly expects it to use part of its profits to strengthen its core capital position needs adequately sustainable profits to be able to continue to fulfil its core activity.

At present, however, the profitability of the sector risks coming under so much pressure that it will become difficult to continue to guarantee the financing of future economic growth. That is a key point for attention, especially under pressure from the additional new legislation.

Realistic demands

  • Public opinion asks that banks do not take any risks, but at the same time that they continue to provide cheap credit. It thus ignores, among other things, the fact that by definition granting loans involves a form of risk, and that there is also a price on that risk.
  • Regulators want banks to finance themselves more in the long term, but make this same long-term financing more risky and therefore more expensive. The new EU rules that are in the pipeline (the so-called bail-in) will ensure that long-term financiers can be called on to intervene if a bank gets into difficulties. That will undoubtedly affect the risk premiums charged for long-term financing.
  • Regulators want banks to reduce their balance sheets and strengthen their leverage, but at the same time politicians want these same banks to also provide more credit, which swells their balance sheet.
  • Political and public opinion wants banks that are not complex, but at the same time asks them to finance a complex open SME economy with an international focus within an ever more complex regulatory framework.
  • Banks are asked to pay a higher return on savings while at the same time keeping the loans that are financed with those savings just as cheap.

Such often contradictory demands make it untenable for a financial institution to continue to function in the new economic reality and meet its commitments. To be able to do that, the 3 keys to success must largely be present.