The Master's Degree in Banking and Financial Regulation of the School of Economics of the University of Navarra, in partnership with Price Waterhouse Coopers (PWC) has organized the workshop Business Model Analysis, in which industry experts have addressed the new model of supervision, which will take more into account the future profitability expectations of the entities when assessing the risks to which they will be exposed in their business model and decide whether they are viable.

The director of Master's Degree, Germán López Espinosa, explains that after the last financial crisis, European supervisors have come to the conclusion that capital requirements are not sufficient to ensure the solvency of banks. "Capital can be eroded quickly in the event of a systemic crisis, so there is a need for a vision that goes further into the future, so that it can be ensured that banks will not have problems overcoming future crises," he says.

This refocusing will allow the Regulator to increase its knowledge on the banks' business model , and therefore on the challenges and risks they face in their daily activity. The risk profile as well as the profit ratios will allow adjusting forward-looking forecasts, so as to ensure that the bank will be able to generate sufficient capital to make it viable in the medium term.

The new model focuses on "forward-looking" supervision, says Germán, who explains that supervisors and regulators will now work with institutions' profitability and risk expectations "much more closely".

Industry, regulators, supervisors and universities

Stephen Bland, from Prudential Regulatory Athority, was the first speaker at the Workshop, and his work served to present the new model for the regulation and supervision of the European banking industry. Oleg Shmeljov of the European Banking Authority then explained how the European Union institutions will implement these new rules in the industry.

Finally, Alberto Calles and José Alberto Domínguez, from PWC, offered a complementary view on the viability and sustainability of European banking. The entire workshop was held at the facilities of Campus BBVA in Madrid.