🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

The euro zone's fragmented banking industry

Published 06/18/2024, 02:04 AM
Updated 06/18/2024, 02:06 AM
© Reuters. FILE PHOTO: The logo of BBVA is seen on the facade of a BBVA bank branch office in Malaga, Spain, April 24, 2024. REUTERS/Jon Nazca/File Photo

By Tommy Reggiori Wilkes and Prinz Magtulis

LONDON (Reuters) - Supporters for more consolidation in the euro zone's banking sector have been watching Spanish lender BBVA (BME:BBVA)'s hostile bid for Sabadell, alongside comments from some supervisors and lawmakers supporting the idea of more tie-ups.

Regulators are keen for more consolidation - both within and across countries - because they believe fewer, stronger lenders will boost the economy and enable euro area banks to compete more effectively with larger, more profitable rivals in the United States and Asia.

Yet big banking takeovers have been rare since the 2008-09 global financial crisis, with most dealmaking forged out of necessity.


Banking industry concentration, as measured by the share of bank assets accounted for by the largest five credit institutions, varies widely across the bloc.

In Greece, Cyprus and the Baltic states, that share ranged between 88% and 95% in 2023, according to data from the European Central Bank analysed by Reuters.

Several of these countries have also seen the biggest increase in concentration in the past decade, as financial crises forced lenders to acquire weaker rivals.

In Spain, where the top five credit institutions' 69% share of bank assets is close to the euro zone average, the number of banks has fallen to 10 from 55 before the global financial crisis.

Germany, by contrast, has hundreds of banks, according to data from its central bank.


Euro zone banking concentration by country is, on average, higher than in the U.S., where the five biggest banks' assets share was 50% in 2021, data published by the Federal Reserve Bank of St Louis show.

But fragmentation is much higher in some euro zone countries, especially in bigger and richer economies like powerhouses France and Germany, where the top five institutions' asset share is 45% and 34%, respectively, the ECB data show.

These countries have seen the least consolidation in the last decade, too.

That's partly because they have avoided the crises that force regulators and lawmakers to dismantle the hurdles usually preventing domestic banking mergers.

Impediments to cross-border deals are even greater and include differing regulations and labour laws, the lack of a euro zone-wide deposit insurance scheme and politics.

Banking executives say that without a Europe-wide banking union, which lawmakers have been trying to achieve for more than a decade, cross-border deals are unlikely.


BBVA's 12.23 billion euro ($13.12 billion) hostile play for Sabadell would rank as one of the largest European banking deals in the past 15 years.

Elsewhere in Europe recent major mergers have been agreed only during emergencies.

© Reuters. FILE PHOTO: The logo of BBVA is seen on the facade of a BBVA bank branch office in Malaga, Spain, April 24, 2024. REUTERS/Jon Nazca/File Photo

UBS last year bought stricken rival Credit Suisse after the Swiss government orchestrated a shotgun marriage to protect the wider financial system.

($1 = 0.9320 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.