European Banking Sector Calls for Consolidation #

A prominent European bank executive has voiced support for greater integration in Europe’s banking sector, stating that there are too many banks in the region for it to effectively compete with rivals from the U.S. and Asia. The executive called for the creation of more homegrown heavyweight banking champions.

The comments come amid ongoing consolidation efforts in the European banking sector. An Italian bank is currently pursuing a takeover of a German bank, while a Spanish bank is actively seeking to acquire a domestic rival.

“If I would ask you, how many banks are there in Europe, your right answer would be too many,” the executive stated. He emphasized that the fragmented nature of European banking activity makes competition challenging compared to other regions, and advocated for consolidation to address this issue.

Recent developments in the sector include:

• An Italian bank increasing its stake in a German bank, aiming to become its largest investor with a 21% stake.
• The German government expressing opposition to this move, describing it as “unfriendly” and “hostile.”
• A Spanish bank launching an all-share takeover offer for a domestic rival.

The executive noted that while domestic consolidation would help stabilize uncertainty in Europe’s banking environment, cross-border integration remains “still a bit further away” due to differing systems and products.

He clarified that mergers within nations make economic sense and should happen, but purely cross-border mergers between banks based solely in different countries may not be economically viable due to a lack of synergies.

The ongoing consolidation efforts in the European banking sector highlight the complex interplay between economic considerations, national interests, and the broader goal of creating a more integrated and competitive European financial landscape.