ECB Wants to Shake Image of Opposing Deals That Could Help Banks
ECB Wants to Shake Image of Opposing Deals That Could Help Banks
(Bloomberg) --
The European Central Bank wants to shake the impression that it opposes mergers that could improve profitability for euro area lenders.
The ECB will give bankers more information to help them do the
math on whether it is worth pursuing mergers by disclosing how
the watchdog treats some of the key factors that underpin deals, said Andrea Enria, who leads the ECB’s banking supervision arm.
European banks are reeling from intense competition and negative interest rates, yet few have managed to execute mergers to reduce overcapacity and increase profits. Bankers frequently blame regulators and stringent requirements for their inability to make deals.
“Sometimes I hear out there the perception in markets that the ECB supervision is negative on consolidation, that whenever we see a deal we tend to set the bar for capital relatively high and that this discourages banks from even considering the prospect of consolidation,” Enria told reporters in Frankfurt on Tuesday. “I’ve been trying to dispel this concern.”
Read more: European banking consolidation coming into focus, BofA says
The ECB will disclose how it treats badwill, an accounting quirk that banks can use to help fund the purchase of competitors that trade at a discount, as well as its demands for the capital adequacy of banks that merge, Enria said.
Enria acknowledged that banks face impediments to cross-border mergers. Still, those restrictions on moving funds across borders are determined by national authorities, rather than the ECB, he said.
None of that means that banks will get a free pass from the ECB.
“Of course we will always ask that the banks that want to engage in a consolidation process have a good business plan and a capital trajectory that is assuring us that they will always be respecting their requirements,” he said.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen
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