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Below is the transcript of a CNBC Exclusive interview with BNP Paribas Chairman Jean Lemierre. The interview was first broadcast on CNBC's Squawk Box Asia on 23 September 2019. The interview took place at the Singapore Summit. If you choose to use anything, please attribute to CNBC and Nancy Hungerford.
Nancy Hungerford: OK Jean Lemierre, thank you so much for taking the time to speak to CNBC SG.
Jean Lemierre: Pleasure.
Nancy: Appreciate it. Talk here seems still once again be about what is taking place between the U.S. and China in the way of trade talks overnight. A little disappointment in the market over Chinese delegation left the United States early as they do restart talks sooner amidst optimism that perhaps a deal would be reached. How would you describe the mood here among those at the Singapore summit? Are people optimistic?
Jean: People have concern. You know it's legitimate but trade is trade. Trade is about negotiations when there are negotiations there are tensions and I'm not so much worried about these types of incidents as any you mentioned. That's part of the negotiating process. I think it will take long. And in Singapore there are questions about this which is fair. The world is waiting for any kind of conclusion about what's happening. It will take time but once more trade is about negotiation, tensions. I hope it will be fixed.
Nancy: Is a conclusion in sight though or for business leaders such as yourself. Is this more now a question of how do you adapt to this?
Jean: Well we need to take into account that global trade may be affected by this negotiations or tensions because anticipations may change. And as a bank we need to take into account the potential slow down the potential review of supply chains that we need to be careful about. Now if you mean that it may mean the beginning of a Cold War quote unquote. That of course we think about this. We need to review this. But I do not believe it's the beginning of a Cold War first. Because I have been trained at the time of the Cold War. I know what it is. And this is not what I see today. We need to be very careful about the words. Yes there are tensions. There are frictions. But I think everybody has understood the benefit of cooperation if not globalization.
Nancy: Do you think too that the U.S. - China are almost mutually dependent on each other in the way of economic harm hurts both the US and China. That you can almost want to avoid that Thucydides trap that could lead to a Cold War.
Jean: But they are not alone. The world is made not only of these two big entities. They are big. But look you have India. India is silent. But part of the game and may I remind you there is Europe and Europe is part of the game and definitively Europe and probably India, we want cooperation maybe a different form of cooperation maybe a different form of multilateral approach maybe less strong than before. But there will be cooperation. I do not believe cooperation will disappear. So we need to adapt to this. That you are right. But we should look at this this way.
Nancy: What are the implications for Europe going forward if this isn't just about trade is really about choice bifurcation of economic systems.
Jean: But you say it should be about choice. My guess is Europe will do its best to avoid that situation. That's exactly my point. If you decide there is a choice to be made it is going for confrontation. But my guess is Europe probably India maybe Africa you know will do their best to avoid this type of situation and to be in good terms with the values with the two with China and the United States and the two will make a lot of benefit out of cooperating with us. So I think there are many forces against a confrontation.
Nancy: Let's talk about the impact we have seen on Europe a lot of attention to Germany and the risks that Germany into a recession in part due to negative impact of trade tension Do you believe that fiscal stimulus is on the way in Germany enough to offset some negative sentiments?
Jean: Well Germany's remarkable success based on technology research skills and global trade and in global trade you always have some volatility. You know it may come for different reasons but you have volatility sometimes it's great sometimes it's slightly more difficult. And this is maybe what we see today. There's probably a need to adapt to the current situation on trade. China and the United States and Germany is in that situation. First, I'm sure they will adapt. They have resources skills they are smart so they will adapt. We shouldn't be worried about this. Now you may we may see the need to support the economy in the short term. And it's a lot about the decisions made by the ECB. The ECB has given a lot of monetary support. Big one a few days ago and they have made very clear that now they wait for some kind of fiscal support to the economy. So this is the ongoing debate in Europe. My guess is it will happen.
Nancy: Yes I'm sure Mario Draghi took his post you can expect to be doing another big bazooka as some have called it near the end of his term. As a French bank, is this welcome or do you think too much for too long that we've seen in the negative rates?
Jean: Look I have a simple view on this. Central banks do what is needed. They are knowledgeable they know the situation. They interact with various central banks and I'm sure they have done what is needed the job we have is to adapt to this. And yes it requires adaptation negative interest rates. Yes. A big challenge for the banking industry. So we have to take this into account. We have to adapt. We have to grow services which can offer a good banking service to the corporate sector and to their savings but we know how to do this. This is what we do.
Nancy: When you say big challenge. I'm curious to whether or not you think the benefits in the way that it's meant to spur growth inflation are worth the cost.
Jean: Yes but that's exactly the point. On the one hand and the central bank is right. We benefit out of low interest rates. We have a very low risk simply because borrowers can pay back more easily. So it's good. That's one question the other question is negative interest rates hurts their transformation. It's more difficult. Flat interest rate curve make banking the traditional banking business more difficult. And that's the point on which we need to adapt.
Nancy: What grade would you give Mr. Draghi as he prepares to step down?
Jean: I think he did well they did very well.
Nancy: What do you expect?
Jean: I think the European economy wouldn't be where we are today if through the crisis through the eighth year last year and we have had many challenges. He was not there. He has given a lot to Europe especially. But whatever it takes you know that's a great achievement.
Nancy: And you have one of your friends Christine Lagarde getting ready to take over at the ECB. What do you think she will bring to the position that perhaps is different from Drahgi?
Jean: Well I shall not compare the two. It's an unfair question. Now Christine. Christine Lagarde knows well Europe, knows where the economy debates and knows where the political debates. So she is going to be a central banker. She will not be in politics but she understands well the chemistry within Europe and that's key. And we see through value situation today within the Eurozone that we need a good portion of political skills to put people together to make sure that monetary policy is made efficient by structural reforms and fiscal policy the way you have mentioned. So she will I think bring a lot in her capacity to engage with governments especially with Germany and Italy.
Nancy: Does that include her ability to make progress on the banking capital markets union accelerate that movement?
Jean: We hope so. The central bank probably wishes progress. We do definitively on banking union. We need to move on. We need to fully implement banking union which is a very good reform for Europe. And we need to open in a speedy way the agenda of the capital market union.
Nancy: And when you talk about Christine Lagarde's relationships with policy makers as well, her ability to really connect the fiscal side. Does that make you worried about a lack of Central bank independence?
Jean: No no no. This is that should be a normal dialogue. Respecting independence of the central bank and of course independence of the policymakers. You know we have to be careful about this. But there is a need for a normal dialogue without you know creating any difficulty from that point of view and nobody in Europe will accept this.
Nancy: There is also hope in terms of the banks in Europe that more consolidation will come about. We saw that at the start of the year Deutsche Bank talks fell apart. Is it still your expectation that cross-border consolidation?
Jean: We see cross-border consolidation in market. Yes we do see it. We shouldn't forget. Yeah. The truth is that there is market consolidation in the banking industry in Europe and that should not be underestimated. Now maybe the ECB is very vocal on the need for cross-border consolidations. I think honestly BNP Paribas has done a sizable one with the acquisition of Fortis a few years ago. So we know what it is. We have taken part in the banking consolidation in Europe and that's wait and see.
Nancy: So you're not currently looking considering any other sizable mergers.
Nancy: I do want to ask you about your business in this part of the world as well because a lot of concentration on what is happening in HK where BNP has a strong presence in your bank too has already encountered some criticism from China about comments that an employee made about the HK protests. How difficult is it for the bank how you communicate with your employees?
Jean: Well we have to be very matter of fact and an employee of the bank on a personal basis has made comments and used words which were not appropriate and there were remarks about this and we have made very clear that in that inappropriate words were not compatible with the standards of BNP Paribas. These are the facts we wish we should not grow a story about this. These are the facts. It could have happened at any time. We have made clear that some words should not be used at all. And I think it's normal we do it it's normal we say it outside inside the bank. And this is what we would have done at any time. Now I know it has happened at a time of in this sensitive context. But you know inappropriate words should never be used.
Nancy: It does speak to the sensitivities the fact that Chinese social media. There were even some calls to boycott BNP Paribas. I mean it does make me wonder if this concerns you when it comes to operating in Hong Kong. Do you worry about the disruptions there and what it means to the reputation for Hong Kong as a reliable centre for financial services?
Jean: What we are not worried about this. No, we are not worried. We see a high degree of stability. Everybody is operating in the normal way. But once more you know insensitive times I speak as a banker you know I don't speak for any other industry but as a banker we need to be respectful of everybody whoever is everybody and when by accident an employee uses words which should not be used. It's not normal. This is not the way bankers should behave. That's all you know and that's the point we make.
Nancy: As an employee though they may say it's my freedom of expression.
Jean: Sure but it has been. I can agree on this except the fact that it has been seen perceived as coming from an employee of BNP Paribas. And then we have we have to say what we think now. It's not easy. I agree with you but it is these are the facts. We should not overstate this. Sensitive times everybody has to take into account the values used especially when you are in an industry which is based on trust and respect.
Nancy: And it also comes at a time where you're looking to expand your presence in China as well. You did get a new license from China. I'm just wondering what your plans are when it comes to expanding your footprint on the mainland.
Jean: And we have mainly two key views on China. The first one is to serve the corporate sector. And I agree with you. The license we have got helps us to do even more. And that we shall do. And we have a second angle which is important is consumer financing. We have you know we are a partner of Bank of Nanjing and we are growing consumer financing which is important for China for the support of the economy. Now we have various other activities but the two main trends strategies we have is serving the corporate sector Chinese offering and the domestic economy.
Nancy: But would it be fair to say that China's opening up of financial services has been a silver lining in this trade fight. Do you think it was coming already?
Jean: It's coming it's coming. China has made very clear that they need to be more open. They welcome more services especially in the financial industry. And now we have to learn how to operate. We have to learn how to do we need. So we do it now for a long time. I hope we know how to do this. But definitively we need to move in a skillful way. We need to recruit people. We need to have good bankers. We need to understand the markets their need and we need to work with the regulators. The way we do it all the countries you know it's not new. But China is big and needs are different. And we need to move step by step in a careful but very committed way.
Nancy: Sir thank you so much for your time. Appreciate it. Thank you.
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