ECB warns that fragmented EU bank scene is vulnerable to shocks

Reuters

10-04-2025

WARSAW, April 10 (Reuters) - Europe must remove barriers to bank mergers as a fragmented financial landscape with differing national rules and customs leaves the bloc vulnerable to shocks and instability, European Central Bank supervisor Claudia Buch said on Thursday.
Europe's largest banks are far smaller than their U.S. counterparts and the ECB regularly argues for more mergers but politicians often resist cross border takeover attempts, fearing the loss of national champions to a foreign rival.
Highlighting this trend, Germany has for months opposed UniCredit's approach to Commerzbank (CBKG.DE), opens new tab, despite the ECB's green light for the Italian lender to raise its stake.
"This fragmentation not only restricts efficiency gains but also leaves financial systems more vulnerable to asymmetric shocks and instability," Buch told a university lecture in Warsaw.
Although Europe has done much to harmonise rules to facilitate cross border mergers, too many differences remain on the national level to impede the creation of cross-border entities, Buch argued.
"There are still many differences in areas such as insolvency law, the mortgage market and corporate governance structures, all of which affect the valuation of assets and the ability to collect collateral," Buch argued.
The EU also has work left to do.
The bloc still lacks a common deposit insurance scheme and countries EU rules give plenty of leeway to member states in how they apply some rules on provisioning, Buch said.
"Mergers create larger banks with the aim of reaping the benefits from economies of scale and scope," Buch said.