Axel Weber, Chair of UBS, argues on 28 July in the Financial Times that a Big Bang is needed for European banking consolidation. His arguments are quite strong as he notes the lack of cross-border banking integration in Europe leads to banks being less able to meet the needs of the economy and support its healthy and sustainable growth. Weber correctly notes that increased integration of banks in Europe would make them more formidable competitors, especially with the US banks that have a historic advantage of operating in a large and integrated economy.
However, I suspect there is a bit of a Freudian slip in his use of the words “Big Bang” as they are linked to the changes in the London investment banking market many years ago in 1986. Whilst that regulatory change led to significant increase in investment banking activity in London including strong outposts of US investment banks, it is not clear that it has led to improved support for the real and sustainable economy. The idea of a European Big Bang to encourage stronger European banks may actually be a call to further increase investment banking activities rather than creating banks that can fully meet the needs of European clients – individuals and enterprises.
But in spite of the less than ideal wording, the creation of true European wide banks with a focus on meeting client needs remains an attractive proposition. The key will be ensuring that the regulatory approach allows for consolidation without losing the focus on meeting the needs of the clients and communities which the banks serve. Again an area where the emerging lessons from the US are not always an attractive story.
