EU Banks Need Scale and Deeper Capital Markets to Compete Globally
By Jan Strupczewski and Francesco Canepa
Challenges and Opportunities for European Banks
DUBLIN/FRANKFURT, Sept 18 (Reuters) - European banks need greater scale and deeper capital markets if they are to compete with US rivals, senior European officials said on Friday, as the European Union looks to strengthen its position in an increasingly competitive global economy.
Political Interference and Barriers to Growth
EU finance ministers and central bank governors were meeting in Dublin to discuss a European Commission report that called for less political interference in bank mergers and the removal of barriers to cross-border banking within the bloc.
The Importance of Scale in Capital Markets
"If European banks want to compete directly with large US banks in that area, they need to be able to operate on a much larger scale in a deeper capital market," European Central Bank Vice President Boris Vujcic told Reuters.
Vujcic said EU banks compared well with US peers on liquidity, capitalisation, profitability and efficiency, but lagged in trading and post-trading activities rather than traditional lending and deposit-taking.
"That is an area where scale really matters," he said.
Case Study: UniCredit and Commerzbank Merger Attempt
One of the most high-profile cases of political interference in bank mergers in Europe happened in June when Germany rejected an offer from Italy's UniCredit to take over Commerzbank. UniCredit began its pursuit of Commerzbank in September 2024, but it has faced strong opposition — highlighting how hard it is to pull off cross-border banking deals in Europe.
Integration and Innovation as Key Drivers
"Greater integration and further cross-border consolidation would give European banks the scale to invest, innovate and compete," euro zone finance ministers' chair Kyriakos Pierrakakis said. "We need European banking champions capable of competing globally."
Pierrakakis said the largest US banks invest more than two-and-a-half times as much in information technology relative to their assets as European lenders, a gap that matters in areas such as artificial intelligence, digital payments and cybersecurity.
Regulatory Considerations and the Path Forward
Vujcic pushed back against calls from some bankers for lower capital requirements, saying this would not necessarily boost lending and could instead fuel share buybacks.
Instead, he said the EU should complete its banking union and savings and investments union to create a truly integrated financial market.
"The European financial market remains highly fragmented in many ways," Vujcic said, citing differing tax regimes, rules and legal systems that raise costs and reduce efficiency.
(Reporting by Jan Strupczewski; Editing by Hugh Lawson)
