ECB calls for reduction in obstacles to euro zone cross-border banking mergers

ECB calls for reduction in obstacles to euro zone cross-border banking mergers

	Published : Wed, 28 Mar 2007 15:44 By : Agencies Print this Story

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FRANKFURT (AFX) - The European Central Bank said obstacles to cross-border mergers and acquisitions in the euro zone banking sector must be reduced in order to boost competition and cut banking costs.

'The reduction of potential obstacles to cross-border M&A activity and the efficient operation of cross-border institutions will be of key importance,' the ECB said in a report on European financial integration.

'Identifying and, where possible, reducing barriers to cross-border banking integration is...one of the policy priorities for the completion of the single financial market,' it said.

It said cross-border banks enhance competition in the banking sector and promote convergence to lower cost banking practices.

Mergers and acquisitions provide the main channel for cross-border banking integration, because they allow banks to access local distribution channels and a ready made customer base.

But the ECB said there are a number of obstacles to cross-border acquisitions in the banking sector.

Rules on the supervisory approval process for acquisitions may be unclear or misused by national authorities, it said.

National company laws may also hamper takeovers by allowing defensive measures such as 'poison pills' or restrictions on share transfers and ownership.

And domestic tax rules may increase the cost of mergers and acquisitions, it added.

National differences in supervisory practices, laws and tax policies may also hamper the operational efficiency of merged banking operations, it said.

Nevertheless, the value of cross-border banking mergers has increased in recent years, accounting for 38 pct of the value of all euro zone banking mergers in 2005-2006, compared with only 14 pct in the 2000-2004 period.

But this is the result of a number of large-scale operations, such as Unicredit's acquisition of Hypovereinsbank, ABN Amro's purchase of Banca Antonveneta and BNP Paribas' takeover of Banca Nazionale del Lavoro, it said. The number of cross-border banking deals has actually been declining, the ECB said.

However, the central bank said it expects cross-border banking acquisitions to grow in the years ahead.

Growing competitive pressures, a high degree of domestic concentration in some smaller euro zone countries and the availability of substantial excess capital all point to further mergers and acquisitions, it said.

steve.whitehouse@thomson.com

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