overview and presentation of the structures of european savings

ESBGEuropean Savings Banks Group

Overview and perspective of the structures of European Savings

and Retail Banks

ESBG is a…

European banking association,

Representative of savings and retail banks in Europe,

Forum for interest representation, cooperation, training and consultancy.

The 3 ‘R’s of savings banks in Europe:

Retail: active in providing retail services for private customers, SMEsand local authorities;

Regional: operate a broad distribution network, providing regional outreach and proximity services;

Responsible: take a socially responsible approach to business and to society.

ESBG Savings and Retail Banks at a glance:

Financial institutions providing key banking services to the community;

ESBG members are diverse, comprising different types of institutionswith different governance structures: from listed entities to traditionalsavings banks;

ESBG members share a common business approach focusing on the retailbusiness and the relationship with customers;

Savings and retail banks are often key for the development ofeconomic activity;

Maximising the rate of return on capital is not the exclusive or evendominant business objective;

Most members share a responsible business approach and a traditionaland historic social engagement with their communities;

Long term relationship with clients which allows to better know theirneeds and their capacities;

Focus in local and regional economic activity; they are key in local andregional development, and most of the time leaders on domestic markets;

Many members form part of a network of vertical and horizontalcooperation schemes (Austria, Germany).

ESBG Membership

(As of 1 January 2011)

29 members from 25 countries

Total assets: €7,470 bn

Non-bank loans: €4,000 bn

Non-bank deposits: €3,400 bn

Number of branches: 69,400

Number of staff : 930,000

SambandIslenskra

Sparisjóda(Icelandic

Savings Banks Association)

. Lloyds

BankingGroup

Argenta Spaarban

k n.v

BPCEFédération Nationale des Caisses d’Epargne

ConfederaciónEspañola de Cajas de Ahorros(CECA)

Caixa Económica da Misericórdia de Angra

do Heroísmo Montepio Caixa Geral

de Depósitos

Associazione di Fondazioni e di

Casse di Risparmio Italiane (ACRI)

Österreichischer Sparkassenverband (Austrian Savings

Banks Association)

Hellenic Postbank

Vakifbank Türkiye Vakiflar

Hrvatska postanska banka d.d. (HPB) (Croatia Postal Bank)

Swedbank Sparbankernas

Riksförbund (Swedish

NationalSavings Banks

Organisatio)

Sparebankforeningen i Norge Säästöpankkiliitto (Finnish Savings Banks Association)

Banque et Caisse

d’Epargne de l’Etat (BCEE)

3S Group

Deutscher Sparkassen-

und Giroverband e.V. (DSGV)

Bank of Valletta Plc

Ceska Sporitelna AS

OTP Bank plc

Latvijas Krajbanka

PKO Bank Polski SA

Slovenska Sporitelna AS

SNS Reaal

Banka Kombetare Tregtare (BKT)

Albania: Banka Kombetare Tregtare (BKT)

Austria: Österreichischer Sparkassenverband (Austrian Savings Banks Association)

Belgium: Argenta Spaarbank n.v.

Croatia: Hrvatska postanska banka d.d. (HPB) (Croatia Postal Bank)

Czech Republic: Ceska Sporitelna AS

Denmark: 3S Group

Finland: Säästöpankkiliitto (Finnish Savings Banks Association)

France: BPCE Fédération Nationale des Caisses d’Epargne

Germany: Deutscher Sparkassen- und Giroverbande.V. (DSGV, German Savings Banks Association)

Greece: Hellenic Postbank

Hungary: OTP Bank plc

Iceland: Samband Islenskra Sparisjóda (IcelandicSavings Banks Association)

Italy: Associazione di Fondazioni e di Casse di Risparmio Italiane (ACRI, Association of Italianfoundations and savings banks)

Latvia: Latvijas Krajbanka

Luxembourg: Banque et Caisse d’Epargne de l’Etat (BCEE)

Malta: Bank of Valletta Plc

The Netherlands: SNS Reaal

Norway: Sparebankforeningen i Norge

Poland: PKO Bank Polski SA

Portugal: Caixa Económica da Misericórdiade Angra do Heroísmo Caixa Geral de Depósitos Montepio

Slovak Republic: Slovenska Sporitelna AS

Spain: Confederación Española de Cajas de Ahorros (CECA, Spanish Savings Banks Association)

Sweden: Swedbank SparbankernasRiksförbund (Swedish National SavingsBanks Organisation)

Turkey: Vakifbank Türkiye Vakiflar

United Kingdom: Lloyds Banking Group

SAVINGS AND RETAIL BANKS BUSINESS MODEL

Savings Banks: A resilient model 1/4

The savings and retail banking model is characterised as follows:

A predominant focus on domestic retail banking with stableresults;

Principally conservative risk management;

Traditional banking based on a long-term relationship with theclient, therefore reducing the problems of asymmetricinformation;

Customer loans mainly funded by customer deposits; higherbusiness stake on customer loans and deposit comparing tocommercial banks;

Conservative remuneration policy;

Internal support mechanisms and guarantees (mutualguarantee schemes).


The savings banks activity is very much linked to theperformance of the economy. If the economy does notperform well, the main customers of savings banks arehit, as was recently the case in some European countries.

Consumer and business confidence is not expected torecover in 2012 due to the Euro crisis; additional cuts ingovernment spending is likely.

Moreover, the regulatory agenda (CRD IV, DGS, CrisisManagement, and now banking union) can intenselyhamper the role of the banking industry on the economy,and in particular the provision of lending to SMEs.

This is why it is so crucial that the savings and retailbanks can overcome the economic slowdown in theEuropean Union, due in particular to the sovereign debtcrisis and the persistent turmoil on the financial markets.


However, savings banks have shown to follow a moreresilient and sustainable model throughout the crisis

Perspectives No. 63: “200 Years of Savings banks

a strong and lasting business model for responsible,

regional retail banking”

Profitability

Stakeholder-

based banks

Commercial

banks

2007 2009 2007 2009

ROAA 0,36 0,19 0,69 0,31

ROAE 8,41 3,88 15,95 7,84

Net interest margin 1,55 1,54 1,26 1,38

Cost to income ratio 60,67 59,04 55,08 58,48

Asset quality (%)

Impaired &

delinquent

loans/loans 2,32 4, 49 3,85 6,05

Credit costs/Pre-

impairment

operating profit 20,43 39,67 17,92 49,59

• According to the data, commercial bank profitability and income ratio is greater than that of savings banks, but the decreasing tendency is more accentuated in commercial banks than in savings banks.

• Ratios regarding asset quality, which is a measurement of stability, are more reassuring in savings banks.

Estabilidad c 05/2011 N°20

Savings Banks: A resilient model to be protected 4/4

In short:

Savings and retail banks in Europe have not been the root of the crisis

They represent a sustainable, long-term model, which is traditionallyengaged in vital, local banking activities

They provide lending to local enterprises at better rates than commercialbanks, creating close relationships between banks, enterprises andcustomers

They are the main providers of credit to SMEs and to the economicactivity. Without this network of credit intermediation the provision ofbanking services to their client would be seriously affected due to the lackof a link between SMEs, companies and capital markets (according to ECBfigures, the share of banks in credit intermediation in Europe liesconsistently in the area of 70%-75% of debt financing to households andenterprises; for other major economies like for example the US thisnumber is around 20%)

The retail banking sector in Europe is key for the correct functioning ofthe provision of banking services to the economy. Any structuralreform should duly consider the specificities of the European bankingindustry

ESBG’s members:BPCE Group in France 1/3

Born in July 2009 out of the merger of the Groupe Banque Populaire and the GroupeCaisse d’Epargne, Groupe BPCE is France’s second largest banking group, with 36 million customers, 8.1 million cooperative shareholders, 8,000 branches and 117,000 employees.

Comprising the Banque Populaire and Caisse d’Epargne networks, as well as expert subsidiaries specialised in their respective fields of activity, Groupe BPCE is active in all areas of commercial banking and insurance, offering solutions in corporate, investment and financial services.

Its full-service banking model is based on a three-tier architecture:

• The two cooperative networks, namely 19 Banque Populaire banks and 17 Caissesd’Epargne, central players in their respective regions;

• BPCE, the central institution, responsible for the Group’s strategy, control and coordination;

• The BPCE subsidiaries, including Natixis, Crédit Foncier de France, BanquePalatine, BPCE International et Outre-mer.

In addition, all credit institutions affiliated to BPCE benefit from a guarantee and solidarity mechanism.

The scope of affiliated entities is mainly comprised of the Banque Populaire and Caissed’Epargne networks and Natixis.


BPCE, the central institution responsible for both theCaisses d'Epargne and the Banques Populaires, officiallycame into existence on July 31, 2009. Acting as averitable governing nucleus, it is responsible for:

The corporate strategy,

The control,

The coordination and management of the Group,

and guarantees the solvency of the whole Group.

ESBG’s members:DSGV (Deutsche Sparkassen- undGiroverband) in Germany 1/4

Credit Banks Credit Institutionsunder public law

Co-operative Banks

– All credit institutions in Germany are subject to the German Banking Act (KWG) and to the supervision of the Federal Financial Supervisory Authority (BaFin).

– Each of the three sectors has its own guarantee system and its own business model.

The structure of the German banking marketThe German banking market comprises:

1 2 3Big Banks

Regional Banks (under private law)

Private Banks

Foreign Bank Subsidiaries

Savings Banks

Landesbank Companies

Central Building Societies

Volksbank Companies

Raiffeisenbank Companies and Cooperative Institutions


The Savings Banks Finance Group

Public Service Obligation

Public Legal Form

Decentralised Group Structure

Co-operation within the Group

Regional Principle

Operational Efficiency

Municipal Trusteeship

The Common Basis of the Group’s Structure Ensures the Success of its Business Model


Savings Banks are locally anchored and located throughout the whole of Germany

Savings Banks have no shareholders. However, they do have an obligation to the general public.

Municipalities are the responsible public bodies for (but not the owners of) the savings banks.

Part of Savings Banks’ profits are ploughed back into their regions.

Each Savings Bank has full responsibility for its own operational activities.

Supporting competition: regional focus enhances intense competition within the business region

Financial inclusion: non-discriminatory service for all businesses and sections of the population.

Typical savings bank location

Savings banks are close to their customers

Figures as of 31.12.2011


Figures as of 31.12.2011

100 million savings, current and security accounts. “Principal Bank” for half of all German customers.

Client deposits: 71% of balance sheet total

Loans to clients: 62% of balance sheet total

Thereof loans to enterprises and self-employed: 30 % of balance sheet total

“Principal bank” for 44% of all German businesses. More than 80% of enterprise loans have medium to long-term maturities.

423 Savings Banks (June 2012)

Total capital ratio: 15.8%

Tier 1 ratio: 10.5%

Return on equity: 10.5%

Stable earnings

Savings Banks are locally anchored and located throughout the whole of Germany

ESBG’s members:Cajas de Ahorros (CECA) in Spain (1/3)

The Spanish Confederation of Savings Banks (Confederación Española de Cajas de Ahorros- CECA) is the national association of the Group of Spanish savings banks.

CECA’s strategic goal is to strengthen Spanish savings banks’ position among the most significant and highly valued institutions of the Spanish and international financial system, in terms of both financial activity and performance their welfare duties.

The Confederation has as its fundamental principle and rule of conduct in its action the most absolute respect towards the personality and independence of its members, both in their organization and in their operating system.

Its aim is to promote, foster and increase the Savings Banks performance enhancing their capital mission in the society.

To achieve this goal, the Confederation, CECA, is committed to spread, support and represent its members’ interests at a national and international level.

Besides its activity as association, CECA is a private credit institution providing competitive financial and technological products and services to the Spanish savings banks and to other entities in the market (CECA´s General Assembly agreed to create CECABANK to undertake its financial activities last July).


1230 bn € total balance

(jun 2012)113.497 employees (jun

2012)20.330 branches (jun

2012)1.125 millions € in Obra

Social (2011)79 million beneficiaries

(2011)

ESBG’s members:Österreichischer Sparkassenverband in Austria 1/2

The Austrian Savings Banks Association:

The Austrian Savings Banks Association (Österreichischer Sparkassenverband) is theinterest group representative of the Austrian savings banks (national and EU) and theumbrella organisation of the Austrian Savings Bank Group. It is a strategic platform,which serves as political representative, works in the interest of ensuring a balance ofinterests as well as offering consulting and services for savings banks.

Strategic positioning of the Austrian Savings Banks Group:

Business goals: Savings banks are classical universal banks with a traditional focuson retail customers, SMEs and asset management.

Customer groups: Individuals, professionals, SMEs, corporate customers as well asgovernment entities and the non-profit sector.

Geographic distribution: Erste Bank and the savings banks are representedthroughout Austria with over 1,000 branch offices in all regions and through theSteiermärkische and Kärntner Sparkasse also in Italy, Slovenia, Croatia, Serbia,Montenegro, Bosnia-Herzegovina and Macedonia. Financial services and consultingare also provided in Central and Eastern Europe through Erste Group’s subsidiaries.

Internal goals: To improve collaboration and the work flows within the AustriansSavings Bank Group; to strengthen the “Sparkasse” brand and become market leaderin Austria.

ESBG’s members:Österreichischer Sparkassenverband in Austria 2/2

The Austrian Savings Banks Association

ESBG’s members:Swedbank in Sweden 1/3

Swedbank originates from savings banks and agricultural cooperative banks. Today Swedbank is a listed company with asignificant operation in its four home markets Sweden, Estonia, Latvia and Lithuania and supporting operations in 9 othercountries.

The bank’s purpose is to promote a sustainable financial situation for the many and its values are: being simple, open and caring

A bank for the many:Swedbank is an inclusive rather than exclusive bank. The aim is to develop large customer bases, long-term customer relationships andhigh market shares in our four home markets.

Close to customers:By being close to our customers we gain a better understanding of their situation and needs, enabling us to provide the right adviceand make fast decisions when required. Close customer relationships and a high level of service are enabled by a widespread branchnetwork, coupled with highly advanced Internet, Telephone and Mobile banks.

Uniform framework and local decision-making:A uniform framework for the entire Group together with local decision making authority, facilitates faster decisions close to thecustomer. Local units are responsible for customer relationships and results. Development and production of the bank´s products arehandled at Group level. Strong leadership is crucial to our governance model, with a clear delegation of responsibility. We thereforefocus on long-term recruitment, training and development of leaders.

A low risk level:Swedbank shall have a low risk level. The risk in its assets is managed with the long term in mind, so that the Tier 1 capital ratio doesnot decline by more than three percentage points in an adverse scenario. A vast majority of exposures are in Sweden. Good riskdiversification is achieved through a broad base of customers and businesses from many different industries. The bank will maintain asustainable balance between lending and deposits in each of its home markets.

Good control and focus on costs:Staying competitive requires us to continuously work with costs.We do so primarily in three ways:- Through a corporate culture where everyone is aware and cautious about costs.- By continuously adapting our organisation and costs to current conditions- By capitalising on economies of scale based on our high market shares in each home market - not least in terms of effective processsupport and IT


Latvia

Population 2.2m

Private customers 0.9m

Corporate customers 75 000

Branches 55

ATMs 396

Cards 0.9m

Employees 1 716

Lithuania

Population 3.3m



Branches 83

ATMs 492

Cards 1.8m

Employees 1 945

Estonia

Population 1.3m



Branches 58

ATMs 507

Cards 1.1m

Employees 2 470

Sweden

Population 9.3m



Organisations 66 000

Branches 312

ATMs 657

Cards 3.8m

Employees 8 055

Source: Swedbank Fact book Q2, 2012


0

10

20

30

40

50

60

Sweden Estonia Latvia Lithuania

Mortgage lending

Corporate lending

0

10

20

30

40

50

60

Sweden Estonia Latvia Lithuania

Deposits Private

Deposits Corporate

Market leading retail franchise in all home markets

%

Source: Source Sweden: Statistics Sweden (SCB) Source Estonia: Estonian Central Bank

Sources Latvia: Association of Commercial Banks of Latvia (ACBL) & The Financial and Capital Market Commission (FCMC) Source Lithuania: Association of Lithuanian Banks (LBA)

Market shares, Deposits May 2012

Largest retail bank and fund manager in Sweden

Market shares, Lending May 2012

%

ESBG VIEWS ON THE STRUCTURAL BANKING REFORM

ESBG views on the models in discussion

Before considering further structural banking reforms theESBG considers that it would be better to wait until all thenew regulations are implemented.

Vickers Report: The ESBG is totally against any furtherincrease in capital requirement for retail banks. This couldcreate the wrong incentives in the banking system.

Volcker Rule: The prohibition to engage in some riskyactivities (such as proprietary trading) may be furtherconsidered.

ESBG views on the structural reform

ESBG is of the opinion that no further regulatory reformsare needed.

The root of the crisis was the lack of effective bankingsupervision and the macroeconomic imbalances.

The on-going regulatory agenda that points out to toughercapital requirements and a better management of riskyactivity should be enough.

The universal banking model has not failed, and should notbe blamed for the crisis; this banking model benefits from thesynergies of diversification of businesses and from an integralprovision of services to their customers.

The ECB’s report on EU Banking Structures provides empiricalevidence that universal banks have been less affected by thefinancial crisis than investment banks due to a greaterresilience based on synergies between different activities.

ESBG views on the structural reform

Any structural reform should avoid the problems that astrict business separation could create.

Business separation could be costly and reduce thebenefits created from the synergies of diversification.

Savings and retail banks have to remain capable toprovide an expected and efficient range of services totheir clients.

In case of limiting the activities that they could engagein (such as trading on behalf of customers, hedgingactivities), the economy could be hit.

Pre-requisites for financial stability:

Prudent risk management;

Solid supervision of the most risky activities and entities;

Wait until the current regulatory agenda is implemented: CRD IV, Crisis management (recovery, resolution, bail-in), DGS, banking union.

overview and presentation of the structures of european savings

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