Below is the transcript of a CNBC Exclusive interview with ING Group Chairman Hans Wijers. 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 Amanda Drury.
Amanda Drury (Mandy): So first of all why don't we talk about the ECB because it's very much in the news recently in light of its decision to try to mitigate some of the negative impacts that have been well-documented: banking sector in Europe with this new clearing system. Will that help you and the banking system in Europe at all, do you think?
Hans Wijers: It mitigates to a limited degree, depending on which bank you talk about. It is the banks that have a lot of savings that will have less impact and the banks that have less of a net savings amount will be helped more, so there will be more in the thousand in the north.
Mandy: With regards to ING, I understand you're not here in the capacity necessarily as ING but is it something that for your bank has been squeezing profitability for you?
Hans: Yes. So we are not convinced that the current efforts of the ECB will have the required effects. I mean what Mr. Draghi and his team has done in the previous crisis let's say the Greek crisis was absolutely great and courageous and necessary. It is our impression that using this instrument now, probably the negative effects outweigh the positive effects.
Mandy: Too little too late.
Hans: Monetary policy has its limitations. And we do not assume that this impulse will create additional investments nor will it incentivize people to consume more. Actually it could result in a lot of uncertainty, where people actually increase their savings and they will certainly not invest more.
Mandy: What do you think the ECB could be doing better?
Hans: I don't think it's fair to put the focus on the ECB. I mean what we have seen is actually the politicians have too long kicked the can in Europe and as a consequence we now basically are stretching the monetary policy to its limits, while in the past couple of years, but also now, fiscal policy, but also restructuring of the countries their economy is required. That is now actually the only thing they can do to stimulate the economy.
Mandy: Do you feel there is enough will on the fiscal side?
Hans: Yes. It is interesting that if you would have asked me this question three months ago I would probably have said "hmm I don't think so". But even in Northwestern Europe in Germany and in the Netherlands, and in Sweden and in Finland, so, in that area, rather than being very hawkish on the fiscal side, you see now that people see that there is a need to give a new impulse to the economy and it can only come from fiscal stimulation. Well I'm not convinced about whether there is sufficient courage to be struck to the economies particularly in southern Europe.
Mandy: How would you categorize your optimism or pessimism? Where would be on the scale with regards to the Eurozone economy and economic outlook?
Hans: Oh well as far as the outlook is concerned it is not that good. We are close to a recession. Manufacturing is already in a recession. Consumption still holds. There are still some governments still stimulate the economy as well, so we're not in a recession yet. I don't expect we're going to experience a deep recession, but it could very well become a recession. If for instance, the Brexit will impact negatively, if it's going to be a no-deal Brexit, if the trade war continues, or when there's other factors playing negatively into the economy, at this point in time we are gradually moving into a close-to-recession situation.
Mandy: I'm glad you raised the issue of Brexit because Amsterdam has been one of the places that haS been a beneficiary in a number of financial institutions, maybe thinking about upping and leaving London. Or maybe just setting up a subsidiary in the EU and they can choose from Dublin, Amsterdam, Frankfurt. What do you think Amsterdam has to offer OVER the others?
Hans: Well first of all Amsterdam is a very – I live there myself – it's a very attractive city because it's a city with a very large cultural and artistic, good atmosphere. It offers a lot of nice housing. It's quite condensed. It's more like a large village in a way, but it offers all the opportunities of a large city, it has excellent connections. So I understand why people moved down.
Mandy: Do you feel nervous that Brexit might just be the start of the dominoes that fall with regards to a number of regions or countries wanting to leave the EU?
Hans: No I'm not nervous about that. I'm nervous about Brexit itself, that's because of irresponsible behavior it will be a hard Brexit. That would have a lot of negative effects that could actually not only have a recessionary effect in the British economy, but also on the Irish economy, the Spanish, the Dutch, the Belgian economy so that would have a significant negative impact on the economy. Apart from that, it will take years and years to repair the damage.
Mandy: Do you see no way out at this stage?
Hans: I have stopped giving any prediction about the outcome of this ridiculous process. In itself, it has been a warning to all populist parties in Europe, playing with the idea of leaving the Euro could mean for the economy and for society. So in that sense I think it is a clear warning that you create enormous debt damage if you contemplate these kinds of ideas.
Mandy: Backtracking just a little bit. But I want to ask you about the question of what the banking sector, what ING is doing to try and mitigate some of the negative impacts of either extremely low or in this case the negative yields. Because you've been diversifying, and I'm an Australian and I've been watching the rise of ING trading with a digital only market which is absolutely fascinating, and I see you're gaining record customers. I think Australia's about one fifth of ING's business. Do you feel that this digital only model is something that you want to roll out to other countries as well?
Hans: Well we're actually doing it. Early this week I was in Romania, where we also have a significant business where it's also a challenger to the existing banks in a combination of digital only on the retail side and a very professional wholesale banking offering to the market which goes very well, which grows market share and ING is now the third bank in Germany, also as a consequence of digital banking concept, so it's in the DNA of the bank to be digital and to be to be in the front line of mobile applications. So there is great opportunities there and this is one of the factors that distinguishes us from other banks and which gets a lot of opportunities for growth.
Mandy: Since you say that distinguishes you against other banks, why don't other banks just jump on the bandwagon and do that as well?
Hans: They do, in various degrees but it takes a lot of time. It starts with the language but then it requires a lot of investments, but also requires a kind of organizational culture and you know building our culture, agile working, everything related to that understanding of what customers really want. To make a bank a customer centered organisation takes a lot of time.
Mandy: Customer-centered orientation does seem to be at odds with digital only doesn't it?
Mandy: Why not?
Hans: Because it's not necessary to serve customers by having expensive offices. If you're able to understand what customers really want and you're able to give them a loan in a couple of hours rather than in a couple of weeks, you really help those customers, not by having a very expensive infrastructure, but actually serving their needs.
Mandy: And has it cut off your costs?
Hans: Of course. Yes.
Hans: Yes absolutely.
Mandy: In Australia though, in light of the Royal Commission and the subsequent squeeze on the other major banks in Australia, there's been a lot of foreign banks that have been wanting to get into Australia on expanding footprint in Australia. Does this mean more competition for you?
Hans: Of course I mean, that's the economy, and that's what you call competition that makes people innovate. So that's great. Whenever you see new models being introduced, others follow, and we experience that also in our area, although we are a leading bank in digital banking. There's other now entering into certain areas of banking and I don't only have to mention Google, Apple Pay, Amazon, but also Alipay and all the others. So we face competition not only from the existing banks and we compete with them, we also face competition from all kinds of other players. So banking, that makes banking a very interesting industry. It is- people talk a lot about changing business models. If there's one industry where you see this happening it's in banking.
Mandy: So just going back to what a number of banks are trying to do to combat the negative effects of low negative interest rates. So expanding overseas, diversification. What are the strategies you're having to either rethink, for example would you be interested in doing what some other banks is doing, which is putting a levy on high net worth individuals or pilot with customers.
Hans: There's all kind of opportunities but I'm not going to speculate on what the bank will be doing. But of course as interest rates go lower and lower even in the negative, you have to basically increase the fees in order to keep your business profitable.
Mandy: Does this end badly? I mean how do you get out of the trap of negative interest rates?
Hans: Well you have to be. You have to grow your business where there is opportunities to grow and increase your fee income. That's the only way to do it.
Mandy: Do you feel that in the old days there might be massive banking MNAs creating big financial supermarkets if you like, and feels as if now MNA's more focused on teaming up to be able to invest in technology. Do you think that's the way forward for the banking sector, by doing R&D in technology, investing in technology, doing digital only things, that kind of thing.
Hans: Yeah. So technology is clearly an area of preference also for ING where we have seen that you sometimes team up with a niche player who has a certain technology that's very useful. You build platforms together, those kinds of opportunities. There are a lot of banks who have huge expensive distribution structures. So a lot of offices throughout their country. Combining them is just creating, actually, increasing the level of your problem for the future. So that is not very helpful.
Mandy: I'd love to talk to you about the environment because I think ING is quite at the forefront of environmental issues with regards to looking into how much the assets on the balance sheet contribute to global warming. I think it's absolutely fascinating. How necessary do you think this is, that banking institutions have to look at how much the carbon footprint is of their clients?
Hans: There are two reasons to do that. First of all, it has to be part of your mission and you cannot be a successful company in this world if you do not deliver a contribution to fighting climate change. So that's number one. So that's part of what a company is all about. You will not be able to have young people, talented people in your company if the direction of your company doesn't make sense. There's a second reason, which is a classical financial reason, which is risk, because if you now were to give significant loans, let's say in coal mining, you have to realize that because of all the regulatory consequences of fighting the climate change, those are very risky investments. So ING has developed a technology which is now working together with a lot of other big banks in which we basically try to help our customers first of all to invest in the right kind of technologies and only when we have the impression that they continue to invest in technologies that we feel do not contribute to solving the societal problems and are risky, we do not support them anymore. So there have been, it's not just language. So my CEO has had discussions in the energy sector in Germany for instance, where we decided to end cooperation with a customer because they were investing in coal mining, coal plants for energy production.
Mandy: I think that the BOE governor Mark Carney calls this the climate Minsky moment that financial companies could face this. Yes they begin to disclose their exposure and their clients obviously to emissions.
Hans: So he's right, he's right. I mean it's, there are risks related to that, societal risk which in the end, if society acts with wisdom, will in a certain point of time be reflected in regulations or costs. You have to take those into account.
Mandy: Do you think in the future that it might even be a key performance indicator like how many emissions you have, that this could be something that is a metric that is looked at in terms of whether a stock is worth investing, or not worth investing in. It's going to be something that increasingly just absolutely essential to disclose.
Hans: Yes you will have to, and people have been working with Mark Carney as matter of fact, I remember from my Shell times, to develop more and more sophisticated ways to measure what you are doing and to get to risks in certain KPI. Yes absolutely.
Mandy: My last couple of questions is with regards to the U.S.-China trade war. It feels like we take two steps forward one step back, sometimes it's one step forward two steps back. How hopeful are you that we can get a conclusion or resolution that is satisfactory?
Hans: That's a very important question. It's not only the trade itself. I mean what we discuss here today and yesterday also at length is the, so there is the whole tariff issue which in itself is already important, but far more important is the whole issue about technology, underlying technology the intellectual property. If we don't find a proper solution for that, the world runs the risk of that it will gradually develop into two competing and excluding technology systems bifurcation they call it, which would be very disturbing, would add a lot of complexity to the new world, a lot of costs. And this requires wisdom from both sides. It could very well be that we get a kind of hibernating situation the next couple of years maybe, even where the trade war kind of remains at its current level, will have a negative effect. Absolutely. And where we need a certain set of combinations and maybe people to bring this to a close. I sincerely hope it won't last that long and that maybe in the beginning of next year also in view of the American elections there will be movements that could result in a deal that would be very good for the world.
Mandy: Indeed it would, if you were able to sit in a room with President Xi and President Trump. What would you say to them?
Hans: I would say to Xi, make sure that intellectual property rights are really guaranteed and that you open up your economy and I would basically say the same to Trump, and do not believe in deals between two countries. Go back to the multilateral system of trade agreements in the WTO.
Mandy: As a European do you feel like you need to pick a side? Or can you remain neutral? Or is no one able to stay neutral in this?
Hans: You can't stay neutral in it but I guess Europe, in its tradition, and having to live with the complexity of all kinds of different players could be a natural kind of party. Maybe to bring the party somewhat together, but in the end, our system is more geared towards the American system than to the Chinese system. Let's be very clear about that.
Mandy: Thank you very much for joining us today.
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