Ahead of the 21st Annual Capital Management and Allocation Conference we spoke with Nicolas Vandenberg, Head of Capital Planning at Societe Generale, about the best practices for making long term allocation decisions and the importance of the interaction between liquidity and capital.
Regarding your session on ‘optimal balance sheet management’, what would you say is the key area banks should be focusing on?
Carefully planning capital and hybrid instruments is increasingly important for financial players today.
Instruments such as AT1, Tier 2 and Non Preferred Senior are indeed the main drivers of ratios under intense scrutiny from supervisors as well as the market, on top of which the leverage, TLAC and MREL ratios. Calibrating correctly the target level of these different hybrid instruments is critical if banks want to maintain robust ratios, keep pace with competitors and strengthen their rating – while keeping cost minimal.
This strategic planning must also be flexible and dynamic to capture regulatory uncertainty.
What are the best practices for making long term allocation decisions?
Long term capital allocation should take into account several parameters such as the bank strategic ambitions in terms of business model and risk profile, the growth perspectives of its businesses, and their contribution to the bank profitability after consideration of current and anticipated regulatory impacts.
Capital re-allocations may require some time to materialize, as organic developments usually show effects over time and contemplated acquisition or disposal options can only be triggered when and if market opportunities arise.
How important is the interaction between liquidity and capital?
Liquidity and capital are tightly interlinked: both influence the structure of balance sheets and consequently, the level of prudential ratios.
Liquidity is not the only field interacting with capital, and capital professionals have been prompted to develop a deep understanding of many other areas such as treasury, recovery planning, stress-testing, ALM or risk-management to achieve effective strategic capital steering.
What do you think delegates will gain from attending this industry meeting?
The conference helps participants browse the most important topics practitioners face today, ranging from upcoming regulations and capital allocation to balance sheet management and stress testing.
The session also allows them to meet and share their views, which is much valuable for banks looking for innovative approaches applied successfully elsewhere.
For more information about the 21st Annual Capital Management and Allocation Conference please visit the event website:https://goo.gl/3sGEit