Betting on bank mergers at European level.

 Painting of Florence (Italy) made by Álvaro García Sánchez.

           

 Translation by Yissel Moya Santana.

    The European project has many problems yet to be solved, but I do not consider that it will go backwards but quite the opposite; surely with the passage of time we will gain in integration and democratization of community institutions. 

 

    To support this integration, it will also be necessary for European companies to come together to constitute larger and stronger corporations in order to be able to compete with Chinese and North American merchants. And, in connection with that, I ask the following question: Why not bet on bank mergers at European level? 

 

    It would be quite positive; as a prelude to a deposit guarantee fund at European level, a merger between Spanish and German, French and Dutch, Italian and Irish banks. Thus they could gain in strength, market share and, hopefully, solvency.

The crisis generated by the new coronavirus, unfortunately, has done and will continue to do a lot of damage to old Europe. The merger between European companies will be essential to withstand the recession that we are already experiencing which can imperil many renowned multinationals. 

 

    Encourage the creation of new, larger and stronger corporations through merger and acquisition mechanisms should be an imperative on the part of the governments of the Member States and the Community institutions. Always respecting the rules of free competition.

 

      Surely the first step is the unification of banks at the country level to subsequently merge the financial institutions settled in different member states. Banks face a multitude of challenges; digitalization, cryptocurrencies, greater importance of counseling, etc. (and all this with tough competition from FinTech companies). And, for this, it will be essential to face these challenges with robustness and extreme solvency.

 

    Low interest rates, a situation that will remain for a long time, (as long as inflation does not skyrocket as a result of some imponderable factor) have weighed down and will continue to weigh down financial entities. 

 
    In order not to interrupt this destruction of value that, regrettably, many banks in the Old Continent are experiencing at the stock market level, they must revolutionize their commercial and business policy. And for this, mergers at the European level will be of paramount importance. 

 

    It would be interesting to see, for example, a merger between Intesa Sanpaolo and Bankinter or between Crédit Agricole and the Spanish Cajas Rurales. In connection with it, why not? It would also be an option to assess the possibility of seeing mergers between banks and insurance companies (for example Mapfre and Santander Bank or AXA and BBVA). 

 

    Europe has to be in the future what it has been since the end of World War II; a territory in which citizen’s civil liberties, the rule of law, business freedom, trade and competition are respected. And to ensure all this, it will require solvent, solid and reliable financial institutions. Mergers will be a good boost to attain these objectives.

Original text by Juan D. Fdez-Cabrera Bermúdez.