José Manuel Campa interview with De Tijd: ‘Perfectly legitimate for governments to issue state bonds for retail investors’

  • Interview
  • 14 FEBRUARY 2024

European banking supervisor: ‘Perfectly legitimate for governments to issue state bonds for retail investors’

José Manuel Campa, who, as Chairperson of the European Banking Authority (EBA), helps set the rules for the sector, sees no harm in governments competing with banks by selling debt securities to retail investors. ‘Banks need to provide a good service to ensure that they don’t lose swathes of customers.’

Are governments guilty of distorting competition if they issue state bonds? This question is once again taking centre stage as politicians indulge in a lot of arm-wrestling over whether to introduce a new tax-efficient, 1 year government bond in March.

The banks, which saw EUR 22 billion wiped off their accounts when the previous state bond was issued, have already repeatedly called on the federal government not to compete with them again in the savings market.

But if the banks hoped that the European banking supervisor would fully share their views, they may be in for a surprise. As Chairperson of the EBA, Campa has been setting the ground rules for banks in the euro zone since 2019. The 59 year-old Spaniard also presides over the notorious stress tests every 2 years to check how shock-proof the sector is.

José Manuel Campa
Spaniard José Manuel Campa has led the European Banking Authority (EBA) since 2019. The institution was set up shortly after the financial crisis to establish a clear set of rules for banks in the euro zone to adhere to.From its headquarters in Paris, the EBA ensures that national banking supervisors in the euro countries interpret the rules correctly, and helps organise stress tests for the banking sector.
Campa, who will soon turn 60, was Spain’s Finance Minister in a previous life, as well as being head of regulation at Banco Santander for some time.

The fact that governments are now using the savings-rate debate to target savers themselves with their own products need not be problematic, Campa says. ‘Players other than banks should also be able to offer alternative saving and investment methods. If a government sees an opportunity somewhere by offering government securities to small savers and investors, then that’s perfectly legitimate.’

The huge success of the government bond issued last summer made Belgian bankers rather nervous.

José Manuel Campa: ‘As a banking supervisor, we naturally want a robust banking sector that is competitive and attractive to both shareholders and savers. With so much liquidity in the financial system in recent years, banks in the euro zone have not had to compete nearly as much in the savings market. As this situation changes, I suspect that savings rates will also increase in the coming months. However, even if banks are not in immediate need of liquidity, they still need to pay higher interest rates to their customers and provide them with a good service. Otherwise, they risk losing large numbers of those customers. This could affect their business model in the longer term.’

Thanks to rising interest rates, both European and Belgian banks have posted record results in the last few weeks. But they have quickly said that this year’s outlook is somewhat less optimistic. How do you see this?

Campa: ‘Sometimes you hear people saying that the profits recorded by the banks at the moment are out of the blue and undeserved. That’s inappropriate. Profitability has been under pressure over the last 10 years due to low interest rates. We should not be frustrated by the fact that they are now making a profit because interest rates are rising. These are simply the cycles the sector now goes through.

‘Although banks have seen their interest income rise significantly in the last few months, we expect that trend to reverse this year, given that interest rates are likely to fall. In addition, banks will have to finance themselves at higher interest rates, and thus incur greater costs. We also need to take into account that euro-zone banks will generally incur a lot more losses on defaulted and non-performing loans, especially in office real estate and on the SME market. But the banks are well placed to absorb this. The situation is much better than the scenarios we factored into the latest stress tests.'

Even if banks are not in immediate need of liquidity, they still need to pay higher interest rates to their customers and provide them with a good service. Otherwise, they risk losing large numbers of those customers.


In the United States, more and more regional banks appear to be getting into difficulty as rising interest rates shake up the office real-estate market. What is the risk of that situation making its way here?

Campa: ‘Banks in Europe are also seeing increasing credit losses, and in Austria, real-estate giant Signa has already collapsed. So needless to say: we’re keeping an eye on this. However, the situation is different from what is happening in the US. European banks are less exposed to office real estate. Furthermore, that market behaves differently in Europe from what it does in the US, where everything seems to change much faster.’

Claudia Buch, the new Chair of the other European banking watchdog, the Single Supervisory Mechanism (SSM), said earlier this week that banks should be more prepared for unexpected risks. Does this also apply to banking supervisors?

Campa: ‘As a banking supervisor, you always kind of hope for the best, while preparing for the worst. We draw up a risk plan with the EBA every year. This year, we will focus on four priorities: managing all risks related to interest rates; looking at how banks’ credit losses develop; banks’ resilience against cyberattacks; and banks’ sustainability efforts. Ultimately, however, crises always seem to break out in places where you least expect them. So we must always remain alert.’


The interview was conducted by Pieter Suy

De Tijd (Belgium)