So, as we just heard from President Draghi, the ECB banking solution is still a very young institution. As it started three years ago, with a lot

of public expectations, hand on heart, how many sleepless nights did you have so far? I sleep very well, to be honest. I have always been sleeping very well, with my body and my nature. Nothing changed. Congratulations. Nothing changed. OK, let me ask you another question on that.

What lessons have you learned in that period of time? I guess you started three years ago and nothing were so perfect as it should be, maybe. Did you see any mistakes in that way? Well, first of all, I should say that it would never have happened like it happened,

what we have managed to achieve, if we had been out of the ECB. ECB colleagues have been wonderful to support the small start-up that we were having when I started in the ECB to January 2014 with two assistants and an advisor.

And we had to recruit about 1,000 people, including the support services, in a few months. We got an incredible support from everybody. So we had the feeling of being a tiny start-up in a very powerful, incredible incubator

with a very good reputation. And the question to you about mistakes in those three years? Mistakes? Well, we can always do things better, but we are also like a young institution learning by doing to a pretty large extent.

Because we have people coming from 19 different countries, well, even more, because all the members of the European Union can apply and have applied. We have all the European Union countries represented, but 19 different ways of doing supervision in the different euro area countries.

So we started by deciding among all those practices where the best practices, and we used these best practices as the rule of the game for the SSM.

So until we managed to harmonize according to these best practices, there were things that were not done perfectly. Today, we are still not doing everything perfectly. We had a good report from the European Commission for the work and achievements of the SSM.

But they have noted that some areas have to be improved, and we will work on this needed improvement, obviously. Complacency is always a bad concept. We should never be satisfied of ourselves, and we want to always do better. So in concrete sentence, what should or could be improved in your work?

Well, we would need a little push to be much better on harmonization and consistency. What prevents us from moving more and better in this area, which is important,

is the lack of harmonized regulation. We have too many national options in the CRD for CRR. My colleague, Ignacio Angeloni, which is just in front of me right now, did a wonderful job to harmonize with a team from 19 countries,

the ones that are in the hands of the supervisors. But we have still the national options that are in the hands of national legislators, and this is not harmonized. It seems that the appetite of European legislators now that they are changing CRD for CRR

is not very big to address this issue, which is not a glamorous issue, but it is an important issue. We also have difficulties coming from the fact that too much, too big part of the European regulation is coming from directives, and not enough from regulation.

And it means that directive has to be transposed into national laws, and there are still tendencies to transpose it in 19 different ways. Still after three years? Absolutely, still after three years. Even, I would say more curiously, there are still national legislators

that take national laws for banks without taking into account the fact that we need to have a single rule book, and IBA is working hard to have this single rule book. So harmonized regulation is definitely very, very important, very crucial.

To have these divergences cost a lot, because we need to employ 19 different teams of lawyers, and it is not efficient. It is a pity that we cannot be more efficient with more harmonized regulation.

So lack of harmonization is one topic, and on the other hand, are you satisfied with the resilience of the European banking system? Well, it has much improved. The European banks, the Euro area banks are in much better shape than they were when we took over supervision in 2014.

They have more capital, better quality capital. They have worked a lot to address their legacy issues, including the non-performing exposures. But the work is not done as Mario mentioned. Well, obviously not, because at the end of last year,

we had 900 billions of non-performing exposures in the Euro area banks. So when you have a problem of this magnitude, obviously you cannot fix it overnight, and it will take more than a year to fix it. How many years to an age?

Difficult to say for the stock, but we have guidance, qualitative guidance on how to address the stock, on how to address credit risks to reduce the risk of non-performing exposures. We have an addendum to this guidance about the quantitative expectations

of provisioning for the steady state, for the new non-performing exposures. So we try to stop the building of future non-performing exposures. And for the legacy, well, the situations are very diverse, so it has to be only case-by-case assessment and solutions.

We are working with all the banks that have two high levels of non-performing exposures in the supervisory dialogue. They have submitted their own plans to address the issue.

We challenge those plans to make sure they are ambitious enough and that they are credible enough as well. And to be credible, they have to be realistic. They cannot promise us miracles. Miracles happen. You don't accept miracles. So a lot is being done through this dialogue,

and a lot of banks have made significant efforts. Some are lagging behind, so it's the work of the supervisors to push the late ones. Looking at the non-performing loans, some banks are still very high. Would you say there are some banks that could be dangerous for the P&M banking system?

No, I will not say that because the weaknesses are more in the medium-sized banks or smaller banks among all significant banks. So it is important for each of these banks, and we will not relax the pressure on those banks, obviously,

but I don't think it has a systemic dimension. Do we need a European bad bank for that non-performing loan? With the volume I mentioned, we can use all the tools that are available. And if there is a creation of a European asset manager,

as was proposed at a certain moment by EIBAR, that could be a good tool as well. All the available tools we'll have to use, provisioning, sales. And it starts even by changing the national regulatory framework.

We spend a lot of time in a stocktake exercise of the national legal environment, the capacity of these national frameworks to address fast in courts when it is needed to be in court. The repossession of collateral, for example, for the secured loans

or for the possibility for the country to have a faster out-of-court solution, which is most of the time better for SMEs or for households for mortgages, for example. The hotspot for non-performing loans is still Italy.

After Monte di Paschi, two other regional banks have requested so-called precautionary recapitalization. Should such banks simply be warmed up? I don't think so. I think the banks have to stop denial when there is still denial,

because we have made denial very difficult right now. So when the banks are not anymore in denial, they have to address their problems. And if they cannot address the problem on a standalone basis, there are possible mergers with bigger banks. We don't see so many mergers.

We don't see, well, we may be seeing some in the future. There were some mergers. For example, Keisha Bank being more important in equity for BPI in Portugal. For example, and so on and so forth.

So, yeah, this is taking place. It's not big, spectacular ones, but there are efficient ones. We are not looking for spectacular solutions, more efficient solutions. With the beginning of the European banking supervision, many politicians promised that never again taxpayers' money will be needed to save a bank.

Unfortunately, this is not the reality, as we know. Do you understand people's frustration with the European project in that case? Well, if they are frustrated because they believe that it doesn't go fast enough, I can tell you I am frustrated myself. Certain days I would like to do more to go faster so that I can understand.

The fact that there is still use of public money, well, this is totally compliant with the legal framework. Precautionary recapitalization is part of the state and rules and the BRD framework.

And sometimes they have in mind taxpayer money that was put in the liquidation of two Venetian banks. Well, this is fully compliant with the legal framework. There were no reasons to resolve these banks at the European level,

no public interest in doing so. That was the assessment of the SRB, which I fully understand and support. Then they were liquidated according to national rules. On the national rules, we are permitting to have this public money. So if the legislators in Europe do not like that, they have to change the legal framework.

They can do that. And as a matter of fact, I would suggest them to change the BRD, which is a directive into a resolution, in regulation, not a resolution, a regulation. Not to have 90 different transpositions of the directive

because what is important for investors is certainty. If we have differences in the billing order, for example, or certain definitions of the BRD in different countries, that will have a cost for European banks.

So it would be great to have regulation that is directly implemented in the same fashion by the single resolution mechanism instead of directive transposed in 19 countries. As a chair of a really important European institution, how much are you concerned about the rise of populism in Europe?

How much are you in fact, maybe, about anti-European movements and environment with your work? Well, as a citizen, I am very European-minded myself. So it's not just by chance that I am in a European job. And indeed, I am very, very concerned.

It's not affecting my work in the fact that I work in a very strong, credible European institution. I have the best of two worlds. I have the expertise and experience of national supervisors in the different countries.

On the distance in the decision-making process, we take decisions in this very solid, credible institution, which is the ECB at the European level, so with some distance from national pressure if they exist. So that's not affecting my job.

But I have the strong feeling that we have to work very hard and very well to deliver on the expectations and be successful. So there is a responsibility? It's a responsibility. People have to feel that we act for public good and to serve better European citizens.

That's the objective, and I think about it almost every day, to be honest. What does Brexit mean for your work and for the European project? Well, Brexit is a very sad decision of UK citizens for a European-minded person.

It will change the context of the SSM and the responsibilities of the SSM. We are meeting a number of banks.

Around 50 banks have visited the ECB and the National Competent Authority, sometimes several times, to discuss their re-localization plans. So they are improving their understanding of the situation.

The SSM banks... How many banks already applied for a bank license? It's about 20 that have something already being assessed. Maybe they have not signed the formal requirement but a kind of pretty comprehensive application

that can be turned into a formal one very, very fast for the re-localized banks. What kind of reforms are necessary to strengthen the monetary union after the Brexit?

Well, I don't know. That's a bit beyond my territory. I think that all the people working for Europe and all the European-minded citizens have to make sure that Europe is successful, that we do our best to provide European solutions.

Otherwise, I think we are, all countries in Europe, even the biggest ones, pretty small compared to the big competitors coming from other regions of the world after the crisis.

And how important is that? Because you are French-born. Is it French and German access to push new initiatives for Europe? I think that's great because, well, I am old enough to have seen that Europe is progressing when France and Germany are working together to develop Europe.

And I'm very happy to see that France is back with a strong European mind and it's very welcome because you mentioned populists and they are too white in my country.

That's a concern really. So we have to, again, the French and the Germans together, we have to work well and to be successful in promoting more European madness among citizens.

And for that, we have to demonstrate that we do a good job and that we are successful in protecting their interests and making Europe stronger. Yeah. We already mentioned cross-border consolidation in Europe and you said there are some small mergers in that case,

but don't we need more and bigger steps on the consolidation of the European banking system? Yes, we definitely need more. I think one of the next objectives for the SSM now that we are in a quasi-steady state,

even if we are a young institution, is to really forge European banking sector. For the time being, we still have different European, different national banking sectors. In fact, growing together and coming together through banking union, we have to forge a European one.

In which way? In which way? Well, cross-border consolidation in particular. I think it's not the job of civil servants, quote-unquote technocrats in the tower, supervisers to decide what is a good cross-border consolidation.

It's our job to make sure that we don't prevent it from happening by having certain elements that make it less likely or more complicated. In particular, we support, I support very much, and we support the possibility of waivers that is introduced by the Commission.

Capital on liquidity, waivers within European groups. One now, it's much more locally only. And I understand as well that, well, some countries are not so convinced that this is the way forward.

But I believe, yes, it's the way forward in order to have single jurisdiction on the European banking sector. And then I hope that thanks to the benefits of a better economic situation, the benefit of consistent supervision for European groups,

the banks on the market will move and get the benefits of a single jurisdiction. They are there. They are very close, those benefits. So it's the moment to reap these benefits. It is the moment, right.

But the question is, what could the ECB banking solution do more to push cross-border mergers? Again, make sure that we are not, we have not created impediments or that we are not making it more complicated. And then when the markets, banks have decided what are the mergers that are making sense,

our work will be to make sure that they are successful, those mergers, and in order to make them successful, we have to challenge the business, the new business model for the new entity. And we have to be, I would say, well, not tough enough, it's not about being tough,

but have good judgment to see where things could not go well if we are not cautious on demanding when the operation is starting. Because mergers are difficult operations and they can be the best or the worst thing.

I will quote you in that case, consolidation is absolutely a necessary set and the sooner it comes, the better. Do you expect mergers in the next 12 months, for example? I would like to see them. Expect, well, yes, I am an optimistic person, so yes, I expect them.

What would it mean for the too big to fail problem if it comes to pan-European mergers? Is it a problem for you? I have never been convinced that size was that important for a systemic risk, in fact.

I think complexity, lack of resolvability of banking groups are problems to be addressed. But size is manageable and now that we are 19 countries, a much larger territory,

it has changed also the assessment of what exactly is too big in such a big constitution, big jurisdiction, I should say, I guess. The European banking unit is not finished, as we all know, at the third pillar.

A common deposit insurance is still missing. Do you understand the political debate and the political concerns on that topic? I understand, but at the same time, we need to move. The countries that still have a high level of non-performing exposures, for example, have to address the situation

and the other countries have to be brave enough to build Europe. I think it's the moment to do it, frankly.

Let me remind you that with banking union, SSM and SRM, we have already significantly reduced risk and we are reducing risk significantly. Both have to move in parallel, reduction of risk and increase of solidarity, but a lot has already been done.

I am very happy to see that the Commission is reopening the discussion that has been blocked for too long. In my view, it's a bit more gradual for that, but we should not forget that the ultimate objective

is to have the same protection for all European depositors, whatever the country. Otherwise, it doesn't make much sense to have banking union. There are a lot of challenges for the European banks, as we already mentioned.

Regulation, interest rates and so on. On the other hand, the new US President Trump has already announced a clear deregulation of the financial sector in the US. When it comes to that lower regulation, what impact do you expect for the European banks?

Well, first of all, we should not fool... You don't believe about what he's talking about? I think it's not that worrisome, at least not yet. I would say we should not fool ourselves. Flexible transpositions of Basel rule have always existed. They have existed also in Europe. On some time, we had implemented Basel rule in a flexible fashion for very good reasons,

because the economies are not the same in the US and in Europe, but sometimes for less good reasons, really. So it exists everywhere. For the US, I would say that the jury is still out, really.

I have discussed a lot around the meetings of the IMF with my colleagues in the US. And I see a wish for more simplicity maybe to abandon the certain elements of Dodd-Frank's that were a bit opaque, like the way of doing the stress tests in the US.

That's not the way we do it right now. But I have not seen a desire to just forget about tough regulation and to go to pre-crisis times. So let's see what happens.

The jury is still out. OK. By the way, are you following Trump on Twitter? Not at all. I don't fully follow Twitter. I am old generation, you know. I am not in social networks. Maybe you should, to understand better. I am still reading serious newspapers instead of Twitters. You are reading Financial Times and Handelsblatt, yes? Yes. On other newspapers as well, not on media.

So the last topic is the digital revolution. How will that change the banking industry in your opinion? Well, competition of FinTech is definitely one of the elements that are putting pressure on the profitability of the banks.

It creates also a lot of opportunities for the banks. They can serve customers that would like to get their banking services through a telephone or tablet more efficiently and less costly. That could help them to reduce their cost to income ratios that are far too wide in certain banks, on average in Europe.

John Krein, the CEO of Deutsche Bank, said he expects a big number of people that will lose their jobs. He said, in our banks we have people behaving like robots doing mechanical things.

Tomorrow we are going to have robots behaving like people. Is he right? I don't know. It may happen. I'm not so sure. The world is changing, but maybe not to that extent. You don't expect a real disruption by digital. Well, it is changing the world pretty fast.

I see what you call a possible disruption. I see it every day doing my work. I can tell you if I receive an email and I have not responded in the next hour, people start wondering whether I am sick or I disappeared somewhere. So, yes, I feel the pressure of the world is changing.

It is changing our lives, but not to an extent that we cannot cope with those changes. Even an old person like myself is coping with these kind of changes so far. But are banks changing France enough their business models? Well, the banks are changing their business model. Well, definitely.

The profitability drivers on the profitability issue is largely triggering these changes. It's not fully final in Europe. They still have work to do. And in particular, draw the lessons of the capacity of banking services in European countries.

And it takes us back to these merger consolidation issues. Well, what do you expect? Do you expect more investments in the IT infrastructure and in digital products and services? Definitely capacity to offer digital services to customers is almost everywhere now and will be everywhere.

But what I would like to see is digitalization inside the banks, in fact, by plugging digital services to almost pre-historical IT systems sometimes,

it's not delivering the efficiency on the cost savings that could be delivered. So now the banks have to be digital internally. And I think it's like for NPLs on the good economic conditions, it's the right moment for the banks to do that because many of them recruited very large teams of employees in the 70s,

people that were more or less my age. We enter into banks. That bank was taking a lot of the students in the end of the 60s and beginning of the 70s. So those people are retiring. So it's not even creating a social issue if they move in this direction.

Fintechs, we already mentioned, will there be partners or rivals for the traditional banks? In my view, both. They may take part of the business on incomes of banks in certain areas,

like payment services, for example. But they will need, in my view, probably the support of banks also to develop themselves. It's a little bit, in my view, like the development of hedge funds a few years ago

when the banks were regretting losing what they were calling wealth management. That was a profitable activity and they lost a little bit of wealth management. But they developed a very profitable business, which was called prime brokerage, working for their competitors, working for the hedge funds.

Dangerous business that was well controlled and indirectly supervised by the bank's supervisors how they were dealing with these hedge funds. So I believe the same should happen regarding fintechs. Banks can also create their own fintechs.

They can buy fintechs. That's part of the move that should take place. The great financial crisis erupted ten years ago. Do you see a new generation of bankers coming up, less risk-driven, for example? Well, indeed, I believe that everybody learned from the crisis, for sure, the supervisors,

but the bankers as well. And I have seen in my previous life, as a French supervisor, that the French bankers were more cautious before the last crisis because they had the memory of the big crisis of the 90s in France.

So I'm sure that bankers have not forgotten the lessons of the crisis. They are not doing some pretty risky, exotic derivatives activities that they were doing before.

At the same time, we are all human beings and there is a characteristic of human beings. They forget the lessons that they learned before. So there will be a moment where they might be less prudent. We see more leverage of operations develop.

Leverage of finance is growing. I think the regulation has addressed a large part of the problem. The governance rules are much better right now than they were before. Culture risks are better identified and mitigated.

But compensation systems are more under control, for sure. I think more could be done to change the regulation in fit and proper for the board members or for senior managers.

Fit and proper is a very old part of the directive and it was conducted under minimal harmonization. When we have 167 national options under maximal harmonization of the CRD4-CRR,

you can imagine what it means, minimal harmonization for fit and proper. So I think we need to have the harmonization, but we need to have the update as well of the national laws that transpose that part.

Because in certain countries, for example, board members, we cannot declare unfit board members that have been condemned by courts once, two times, three times if there are a lot of possible records until the ultimate possibility of being clean is not exhausted.

Until this moment, they are still in the boards of the banks. When in most other countries, thanks God, when a banker has been condemned for something that has something with his integrity,

capacity as a banker, even if it can be cleaned in the second step, we can ask these people to prepare their defense instead of still working in a board. Or most of the time themselves decide that, okay, they work to clean their reputation first, get cleaned by the courts,

because sometimes courts make mistakes. The decisions are reviewed at another level. But when you are obliged to wait until the ultimate decisions of the ultimate court to say to somebody,

no, you are not fit for a board, there is a serious problem. But in total, would you say the cultural change is more than a word? Oh yes, it's more than a word, but we are not totally where we would like to be.

The progress are diverse, let's say, and even among the best pupils there is still room for improvement. If you had a wish, what would it be? Would you like to be felt, loved by bankers? Oh, certainly not. It's a curious idea. I don't know whether, and I don't care whether they love me or not.

As a supervision, and I hope that I believe it's the same for my colleagues, we aspire to be respected for hard work and sound judgment, and also for being adequately tough and totally fair in supervision.

That's my aspiration, not to be loved for sure. Thank you very much for that open and inspiring conversation, Madame Muyi. Thank you.