mr wellink speaks about trends in the european banking industry and in banking supervision speech held by dr a h e m wellink, president of de nederlandsche bank, at the launch of the netherlands society of investment professionals on 6 october 1999. * i. * * introduction ladies and gentlemen, it was with great pleasure that i accepted the invitation to deliver a speech on banking supervision at this official launch of the netherlands society of investment professionals. on this occasion, i would like to give you a broad picture of the major trends in the european banking industry. after having discussed the key driving forces for change, i shall present the strategic responses of banks to these forces. i will then describe the reactions of banking supervisors to these changes. at the end of my speech, i shall share my views on the future of banking with you. you will understand that it is impossible for me to tackle all relevant issues due to time constraints. ii. forces for change in european banking the european banking landscape is generally expected to undergo drastic changes over the next few years. perhaps the most fundamental force for change in the financial sector has been the evolution of technology, particularly computing and telecommunications. technological innovations affect banking capacity by changing production costs. they also spur disintermediation, increase competition by lowering entry and exit barriers, help the internationalisation process, and so on. technological developments have shaped banking business both internally and externally. internally by means of the reconstruction of banks ’ internal organisation and production processes and externally by spurring product innovation and establishing new distribution channels. the fruits of developments in information technology are, of course, available to non - banks as well as banks. another driving force behind structural changes in the european banking sector is undoubtedly the introduction of the euro. it is assumed that the euro capital markets will be deeper, more transparent and more liquid than the previously existing national capital markets. this could make it cheaper for large corporations to raise money directly in these markets than to borrow from banks. the privatisation of banks is another force for change. it is also argued that the deregulation of the financial sector will further erode the obstacles that deny new providers of financial products access to the market. demographic factors are also shaping the european banking industry. the widely held view thus appears to be that european banks are heading for turbulent times. the driving forces just mentioned will lead to intensified competition not only among banks but also between banks and other, new financial intermediaries. this is generally expected to increase the

customer relationships can be observed. the driving forces identified in this speech may have put the industry under pressure but, more importantly, they have also created new opportunities. one is left with the undeniable impression that the regulation of banks has not prevented them from developing new activities and entering into new markets. in this respect, it may be noted that banking supervision and regulation are naturally frequently re - assessed in light of new developments. the recent suggestions for adaptations in the regulatory framework for banks by the basel committee on banking supervision mirror the genuine intention and proactive attitude of supervisors to ensure sound market conditions in the financial services industry, and to safeguard the stability of the global financial system. having said all this, i cannot but finish with an optimistic observation. the banking industry has shown ingenuity in coping with many challenges. this is mirrored in the diversification of its activities. by continuously aiming at a high level of ethics and professionalism within the dutch investment community, the netherlands society of investment professionals will certainly contribute to the health and integrity of the financial sector in general, and the banking industry in particular.