The facts on the ground are quite good. We are looking at tax reform in the US, economic growth and a jobs number that are all very positive.

Then you mention the volatility. We have an unpredictable president in the US, and much of what he says creates volatility. No one really knows what will happen next regarding tariffs, the North American Free Trade Agreement and other diplomatic issues. This makes a lot of people nervous.

We are of course all worried about inflation and deficits. But generally we have very good statistics coupled with a lot of uncertainty. Usually when conditions are so good people like to keep quiet and let the good times roll, but this is clearly not what the president of the US has in mind.

This is big news for the euro and we don’t know exactly what impact it will have on spreads, which is why we are trying to execute our funding plan as early as possible. To date, we have already carried out nearly 50 per cent of our funding plan for the year.

It is certainly a reasonable amount of money to raise so we try not to overreact. We have our own prefunding regime of 120 days, to make sure we are not caught in a bind.

The volatility in the market feels bad relative to the last 3-6 months, which was a very issuer-friendly market. However, it doesn’t look so bad compared with the last 3-5 years. Spreads are still extremely tight compared with where they have been in the past and we still feel good about our core markets.

We do the majority of our funding in Canada and the US, as well as a fair amount of covered bonds in euros. We also executed a short-end Australian dollar deal here this year, so we are diversified and we feel reasonably good about these markets.

In our case, capital-markets business is controlled through our subsidiary, Natixis. It has a fairly small operation in London, though – so we do not expect any significant impact from Brexit.

Some things we have seen in Canada have also been seen in Australia. We had a Basel I floor in Canada around which the Office of the Superintendent of Financial Institutions has issued new directives. The regulator does things that make sense, and we see a lot of the same things here in Australia.

We do not expect any additional impact from the output floor of 72.5 per cent. It is quite manageable, but I know very well that in Scandinavian countries and Holland the impact could be a lot more significant, due to a risk weighting of mortgages which is quite low in some cases. We have high capital ratios already, so we do not expect any significant impact from this.

This is more or less the case for all the banks that have made some disclosure. What we do not yet know is the kind of volatility it might bring to quarterly earnings. There may be some, but we will obviously find out when those quarterly earnings are published.

There was a lot of talk about whether it should price closer to tier-two or to old-style senior. The fact is that it is pricing much closer to senior. I would argue that it really depends on the amount of regulatory capital or own funds to protect the holders of senior nonpreferred. We have a big buffer of own funds to protect the holders of senior-nonpreferred debt, so it makes sense that it is pricing closer to senior.

We were recently in the euro market with a five-year floating-rate and an eight-year fixed-rate bond. We had to pay a premium over the senior preferred of low-20s basis points for the five-year floating-rate notes and 31 basis points for the eight-year fixed-rate.

That is not a huge premium. But at the same time it is quite attractive to investors because it pays more than senior preferred, and the risk is not all that different if the issuer has a big buffer of own funds. We saw a very large orderbook, of nearly €4 billion (US$5 billion) for the two tranches, from which we priced €1.5 billion.

We have not issued senior nonpreferred in Australian dollars yet, but we would like to do so when the basis swap works reasonably well for us. We were the first senior-nonpreferred issuer in the Samurai market, where it works very well. We have also been issuing senior nonpreferred in US dollars. The market has established itself very quickly and we no longer receive many questions about the product.

It hasn’t changed much over this period. There will be one class of senior going forward and it will all be nonpreferred. Outstanding debt will be grandfathered so there will be a super-senior class as that debt matures. Everything new that is issued with greater than 400 days’ tenor and unsecured after the implementation will be subject to the bail-in regime.

Shorter than one year won’t count for total loss-absorbing capacity ratios. There is no capacity to issue non-bail-in senior debt, which will make secured funding a bit more attractive on a relative basis. On the margin there may be a bit more asset-backed securities and covered bonds issued to the extent we can
do it. It is a fairly straightforward and simple regime.

There are a lot of guesses as to where pricing will go as there won’t be directly comparable deals. If someone issues just before the implementation or if there is a long-end senior deal we might be able to compare, but this will be short-lived.

We will be well overcapitalised and won’t have the ability to issue senior debt, so we think the price will be high single-digits wide of senior.

Issues are typically C$300-500 million in size, though we did a deal 18 months ago which was C$1 billion. This was the largest-ever preferred deal in Canada – it is a fairly small deal to be the largest ever.

This is the way it has always been done and, for tax reasons among other things, it has been impossible to issue any form of tier-one capital outside of Canada.

The new structure avoids withholding tax and allows issuers to access the US market. Bank of Nova Scotia has issued a US$1 billion deal that was attractively priced, in line with what it could have done in Canada but with bigger volume and different investors. The new regime has opened up the ability to
diversify capital.

It is interesting when you think about what banks are able to do in Australia. Everyone worked together to solve two problems. There was a view from the Department of Finance that this was important so the regulators and tax authority worked together to come up with a structure that would allow more capital diversification and a greater ability to raise capital.

What we have now gives more flexibility and is intended over time effectively to replace the retail market. But we executed a retail preferred deal a few weeks ago, so it hasn’t yet done that. There are still shortcomings and issues. The pricing has come in on retail to compete favourably against institutional
AT1 as well.

Issuance has been fairly limited. Among the large French banks, only Crédit Agricole has sold senior-nonpreferred to its retail customers so far. The denomination has been raised to €15,000, from €1,000 or even less in 2016 when Crédit Agricole and ourselves were selling tier-two to our retail customers.

This effectively excludes the mass market from these transactions. The rationale behind raising the denomination was that you are not really dealing with the retail market in the sense of the mass market. You are dealing more with private-banking customers.

We are very lucky to have a deep home market and a secondary home market in the US, where a third of our business is. However, we certainly don’t rest on our laurels. We want to make sure we are issuing around the world and have good funding diversification.

We will execute deals that don’t have clear relative value so we have those markets available to us should we need them. In theory, paying a little more in one market alleviates pressure on spreads in another. Perhaps it creates value in and of itself.

It is not very well known, but BPCE is the largest issuer in the Samurai market. We have brought a lot of innovations over there, including senior-nonpreferred and social bonds.

When it comes to the Australian dollar market, investor diversification is the main driver. But at the same time we pay attention to how much it would cost relative to funding in euros. We are prepared to pay a bit of a premium for the sake of diversification, but there is a limit. Obviously, monitoring the basis swap is one of our priorities here.

We have not been lucky the past two years. The last BPCE issues in Australia came in 2015, when we priced a senior deal in April and a tier-two in October. We are optimistic for 2018 and hopefully we will be in the Australian dollar market. We would like to do a dual-tranche transaction out of our Kangaroo programme combining senior-preferred and senior-nonpreferred bonds.