Risks outweigh rewards for very large EU bank mergers

2019 ◽  
Keyword(s):  
Mergers And Acquisitions ◽  
Banking Sector ◽  
Banking Union ◽  
Content Type ◽  
European Banking Union ◽  
Model Combining ◽  
Banking Markets ◽  
European Banking ◽  
Domestic Banks ◽  
The Eu

Significance The 2008-09 financial crisis led to consolidation of the EU banking sector through mergers and acquisitions (M&As) of mostly domestic banks. A few EU countries have highly concentrated banking sectors, but most do not, including Germany, the least concentrated in the EU. A prime motive for merging Deutsche and Commerzbank, the country’s first and second largest banks, was that Germany’s network of exporters requires access to competitive financing. Impacts Defragmenting national banking markets and the drive for a European Banking Union (EBU) will encourage M&A approval. EU competition bodies are likely to thwart M&As among the eight to ten largest EU banks over systemic-risk fears. Successful M&As will need at least one of the partners to have a profitable core model; combining bad banks just makes a larger bad bank.

Conclusion

2017 ◽  
Author(s):  
Rachel A. Epstein
Keyword(s):  
Economic Policy ◽  
Global Economy ◽  
Banking Sector ◽  
Banking Union ◽  
Major Powers ◽  
European Banking Union ◽  
Catching Up ◽  
European Banking ◽  
Domestic Banks

The study’s findings from Europe have implications for other major powers, including that: (1) banking sector protectionism became increasingly costly given other liberalizing trends; (2) foreign-owned bank subsidiaries can provide more stable funding in crises than alternative foreign or even domestic bank activity; (3) foreign domination in finance limited catching up in the global economy, but in fact few states showed the capacity to exploit domestic banks for national goals; and (4) centralized bank governance through European Banking Union weakened bank–state ties in Europe, and elevated the role of markets there. This chapter analyzes the relevance of the findings for the BRICS (Brazil, Russia, India, China, and South Africa). China is perhaps the clearest case of a country struggling to both liberalize and retain the economic policy autonomy associated with a largely state-controlled financial system. The conclusion specifies the broader transformation in bank–state ties, but also its limits.

The opportunity for euro-area reform is closing

2019 ◽  
Keyword(s):  
Euro Area ◽  
Deposit Insurance ◽  
Insurance Coverage ◽  
Burden Sharing ◽  
Banking Union ◽  
Governance Reform ◽  
Content Type ◽  
European Banking Union ◽  
European Banking ◽  
The Eu

Subject Euro-area governance. Significance In the EU, macroeconomic governance reform is focusing around the creation of a euro-area budget and a European Deposit Insurance Scheme (EDIS) -- the final pillar for the completion of the European Banking Union (EBU) which would provide stronger insurance coverage for member states. However, northern countries are reluctant to pay for crisis-prone ones in the south, so compromise on detail could take years while the initiatives will have limited scope in responding to crises. Impacts The ECB’s Single Supervisory Mechanism will continue to focus on ‘risk reduction’ measures, including the disposal of non-performing loans. The EU is unlikely to give Italian budget concessions perceived as acceptable by Rome, possibly hardening the position of Italy’s populists. If Manfred Weber’s candidacy to become European Commission president fails, Berlin will likely insist that it gets the ECB president post. The rise of migration flows in the Mediterranean and the lack of EU resolution on burden-sharing will worsen north-south relations.

scholarly journals Multilevel cooperation in the EU resolution of cross-border bank groups: lessons from the non-euro area Member States joining the Single Resolution Mechanism (SRM)

2021 ◽  
Author(s):  
Agnieszka Smoleńska
Keyword(s):  
Euro Area ◽  
Banking Union ◽  
Member States ◽  
Essential Condition ◽  
European Banking Union ◽  
Cross Border ◽  
Single Resolution Mechanism ◽  
European Banking ◽  
Administrative Oversight ◽  
The Eu

AbstractCross-border banking presents a unique set of challenges in the EU from the perspective of arranging administrative oversight structures. Structuring cooperation between different EU and national authorities in a way which is conducive to trust-building and mutual engagement is an essential condition for overcoming disintegrative tendencies in the internal market. To assess how the existing EU arrangements fare in this regard in the context of EU resolution law, this article comparatively analyses the different models of multilevel administrative cooperation in the post-crisis EU framework. These are specifically the centralised model of the European Banking Union (Single Resolution Mechanism) and the relatively looser networked model of the resolution colleges. The multilevel cooperation under both models is nuanced given the distinct roles of the national resolution authorities, EU agencies and the differentiated status of non-euro area Member States in the EBU (Croatia, Bulgaria). The article’s findings allow to identify specific problems of constitutional nature pertaining to the accountability of administrative cooperation, equality of Member States and the implications of Meroni doctrine’s distortive effects.

Justice system and corruption dog Bulgaria’s euro bid

2019 ◽  
Keyword(s):  
Banking System ◽  
Political Support ◽  
Banking Union ◽  
Waiting Room ◽  
Content Type ◽  
Eu Member States ◽  
European Banking Union ◽  
Finance Minister ◽  
European Banking ◽  
The Stability

Significance Bulgaria must also join the European Banking Union (EBU) as part of its Exchange Rate Mechanism (ERM) II bid, in order to alleviate concerns over institutional governance, economic convergence and the stability of its banking system. ERM II accession -- the ‘waiting room to the euro’ -- would bolster Bulgaria’s financial and monetary stability, and help serve as a policy anchor; Bulgaria had hoped to join this month, but Finance Minister Vladislav Goranov said in June he now hoped for entry by year-end if not before. Impacts Timing will depend on Bulgaria’s meeting the new requirement to join both ERM II and the EBU at the same time. Political support from other euro-area states could also affect the ultimate timeline. That Croatia has just applied for ERM II shows adopting the euro is still a goal, particularly for smaller EU member states.

EBA relocation will alter the EU balance of power

2017 ◽  
Keyword(s):  
Banking Sector ◽  
Financial Integration ◽  
Balance Of Power ◽  
Single Market ◽  
Content Type ◽  
European Banking Authority ◽  
The Future ◽  
European Banking ◽  
Tabloid Press ◽  
The Eu

Subject European Banking Authority post-Brexit Significance The post-Brexit relocation from London of the EU's prudential regulator for its banking sector, the European Banking Authority (EBA), will signal the future stance of the EU towards financial integration. The choice of where to place the authority will give the first hint of whether EU banking will remain an open single market, coalesce around the euro and strengthen supranational cooperation or fall into internal squabbling. Impacts The main loser from this decision is London, which will see the first explicit institutional relocation resulting from Brexit. The EBA’s relocation is not likely to affect the Brexit negotiations, despite some tabloid press rhetoric. Losing the EBA will make it harder for British financiers and regulators to understand future EU regulations.

scholarly journals Sustainability in the Banking Sector: A Predictive Model for the European Banking Union in the Aftermath of the Financial Crisis

2020 ◽  
Vol 12 (6) ◽  
pp. 2566 ◽  
Author(s):  
Cristina Gutiérrez-López ◽  
Julio Abad-González
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Stress Test ◽  
Random Effect ◽  
Poor Quality ◽  
Banking Union ◽  
European Banking Union ◽  
Financial Variables ◽  
European Banking ◽  
Bank Soundness

Given the central role of banks in financial stability and the recent impact of their insufficient capitalization, this article focuses on finding determinants of their solvency through financial variables. The study considers the European Banking Union framework and the results of the latter stress test exercises, using a panel of the 45 banks based in 15 European countries that were stress tested in 2014, 2016 and 2018. This paper models bank soundness proxied by the stressed tier capital 1 ratio by means of financial indicators representing a CAMELS (Capital, Assets quality, Management, Earnings, Liquidity and Sensitivity to market risk) approach as well as global systemically important financial institutions (G-SIFIs) additional requirements. The model also specifies a dummy covariate referred to the disclosure of corporate social responsibility (CSR) reports, adopting a comprehensive sustainability scheme. The research period starts with the European Banking Union and includes the three exercises conducted since then. We find that financial sustainability is positively correlated with higher capitalization, earnings and liquid assets, while poor quality assets (high non-performing loans) and inefficiency impact negatively on bank soundness. Moreover, it considers the year-scenario interaction either as a fixed or a random effect. The results support capital and liquidity regulation and highlight factors that reinforce banking soundness. They also reveal a positive connection between CSR and banking solvency.

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