Speech in honour ofMr. Alessandro Profumo, Chief Executive Officer of UniCredito Italiano S.p.A., European Banker of the Year 2002

Speech by Ms Gertrude Tumpel-Gugerell,Member of the Executive Board and Governing Council of the European Central Bank,Frankfurt am Main, 30 June 2003.

Introduction

Ladies and Gentlemen,

It is my privilege today to honour Mr. Alessandro Profumo, Chief Executive Officer of UniCredito Italiano, as European Banker of the Year 2002.

Traditionally, the banker distinguished by the "Group of 20 + 1" in the previous year hands over the award to the new European Banker of the Year. In 2002, you chose to honour the Governing Council of the European Central Bank. It is therefore on behalf of the whole Governing Council that I am happy to address you today.

Looking back at the list of distinguished personalities who have received the title of European Banker of the Year since the introduction of this award in 1994, it is striking that more than half the recipients have been central bankers.

What is the difference between a central banker and a commercial banker? One striking difference is that we do not have as many mergers in central banking. There is a joke about a commercial banker who knocks on heaven's door. To his great surprise it is not St. Peter, but the devil who opens the door. Asked how this could be, the devil answered: sorry, we had a merger recently. Because in central banking we do not merge so easily, we decided that instead we would co-operate more closely. This was how the Eurosystem was founded, with the ECB and to date 12 national central banks deciding and implementing European monetary policy.

1. From monetary stability to efficiency in the usage of capital

As a central banker, I am deeply aware that our role, in essence, is to preserve the integrity of money. This is achieved through the maintenance of price stability of course. It is also achieved through our contribution to financial stability, through the provision of safe and sound banknotes and through our action to promote the smooth functioning of payment systems. In the conduct of our tasks and the fulfilment of our objectives, our fundamental concern is to provide the economy with "good" money.

The reason for this was summarised by John Kenneth Galbraith almost thirty years ago. "When money is bad," said Galbraith, "people want it to be better. When it is good, they think of other things". In other words, central banking is successful when people stop thinking about it and focus instead not on money itself, but rather on what it was intended for in the first place: commerce; savings; investment; funding innovation; and generating value, jobs and economic welfare.

With the euro, monetary stability has been achieved in Europe. Our attention should now be devoted to efficiency in the usage of capital as well as in other fields. This, I believe, is an area where Europe still faces considerable challenges. It is for that reason that we at the European Central Bank have repeatedly called for efficiency- and flexibility-oriented microeconomic reform of the labour, capital and product markets. Such reform is essential and should be complemented by a stability- and growth-oriented macroeconomic policy.

One of the reasons put forward by the Group of 20 + 1 for awarding the title of European Banker of the Year to Alessandro Profumo is his success in forging a "strong, lean and very profitable bank". I welcome in this decision the wish to reward success in achieving efficiency. Indeed, UniCredito ranks highly among European banks in terms of its return on equity.

Solid, profitable banks are naturally beneficial to their stakeholders, be they shareholders, customers or employees. But they also benefit the economy as a whole. Sound and profitable banks are more likely to continue to supply funds for investment in periods of cyclical economic weakness and therefore contribute to smoothing the business cycle. Efficient banks are more likely to promote financial innovation by allocating capital efficiently towards the most rewarding projects. Financial innovation, in turn, improves the productivity of capital and thereby raises the growth potential of the economy as a whole. Ultimately, whether we work in the public or the private sector, this is our common goal.

2. Adjusting to a new "domestic" dimension: the enlarged European Union

The other element of complementarity between our actions as central bankers and the strategic decisions of commercial bankers relates to the scope of business.

It is perhaps worth recalling that the decision to adopt a single currency was the natural consequence of the decision to implement in Europe a Single Market for goods and services, for labour and for capital.

I underline that it was a natural decision, because the raison d'être of money, as I indicated earlier, is to serve as a means of exchange, a unit of account and a store of value for its users, that is, for participants in a market. The natural perimeter for money is the market that it serves. Any other perimeter would be sub-optimal by its very construction.

It is clear therefore that the vocation of the euro is to serve, in due course, all the citizens of the European Union. This has two simple consequences.

The first consequence is the overriding need to further and complete the ongoing process of European financial integration. Much attention is currently being given to this objective, and in particular to the European Commission's ambitious undertaking, the Financial Services Action Plan. We at the European Central Bank are committed to contributing to the attainment of this objective, as far as our capabilities and competences allow.

Financial integration, however, cannot be achieved by the authorities alone. It must also be achieved by market participants themselves, either in the form of co-ordinated action or simply by taking advantage of all the business opportunities that the Single Market provides.

In this context, it must be possible for market participants to exploit the potential economies of scale generated by the broader dimension of the euro area relative to national markets. A market for corporate control within the euro area's financial system needs to emerge to allow the creation of pan-European players in all areas of finance.

The second consequence of the vocation of the euro to serve the whole European Union concerns the perimeter for integration. This needs to increasingly be thought of as including in due course the future Member States of an enlarged European Union. To illustrate what I mean, think of a ten-year bond denominated in euro issued today. The principal of the bond, which will be redeemed in ten years, will probably not be redeemed in the same currency as that in which it was issued. The redemption currency – the euro – will by then possibly be the currency of twenty or more European countries.

For anybody who trades in long-dated bonds today and who extends bank loans with a maturity of more than a few years, the concept of the euro as the currency of the enlarged European Union is already a de facto reality.

The considerable investments of UniCredito in Poland, in the Czech Republic and in Slovakia in particular testify to the creation of a banking group on a scale commensurate with that of the enlarged European Union.

From that perspective, by awarding the title of European Banker of the Year to Alessandro Profumo, it is not only an outstanding Italian banker that the Group of 20 + 1 has honoured, but also – and more appropriately – an outstanding European banker.

Conclusion

Let me now conclude by trying to answer to the question about what it takes to be a good banker.

Apart from the ordinary skills that you find in textbook descriptions – that is, managerial skills, dedication to his work and a high credibility as a business person – a good banker has to be able to evaluate risks to successfully distinguish between potentially good and bad investments. Economic progress is dependent on financing being readily provided to fund the development and realisation of new ideas.

Alessandro Profumo has proved himself able to combine the ordinary skills of a good businessman with the qualities of an outstanding banker. This is why he has been made European Banker of the Year 2002.

I wish you, Alessandro, all the best and would like to extend to you my sincerest congratulations – not only on behalf of the European Central Bank, but also on my personal behalf.

Thank you for your attention.

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