Recording of the online debate held on 21 July 2020.
Speakers:
- Edouard Fernandez-Bollo (ECB Supervisory Board);
- Diego De Giorgi (Independent Director, Unicredit; former Global Head of Global Investment Banking, Bank of America Merril Lynch);
- Andreas Dombret (Columbia University, former Member of the Board of Deutsche Bundesbank)
Moderator: Elena Carletti (Bocconi University and Florence School of Banking and Finance, European University Institute)
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The consolidation of the banking sector(s) in the European Union is an ongoing development. Consolidation may entail different benefits, in boosting banks’ profitability through economies of scale and cost-efficiency, and in addressing overcapacity. At the macro level it may foster private risk-sharing (such as in the Banking Union). However, consolidation might also be in tension with preserving the stability of the financial system (e.g. resolvability) or with ensuring a level playing field among market players. Lastly, at the bank level, consolidation might also undermine sound risk management.
Against this background, the European Central Bank’s supervisory arm has recently elaborated on three key prudential aspects to consolidation transactions in a draft guide: the setting of capital requirements and guidance, the treatment of badwill, and the use of internal models by the newly consolidated entities.
This online debate discusses opportunities and risks in the consolidation (incl. cross-border) of the European banking sector. It will review the merit of defining supervisory expectations on consolidation, will ask if and how consolidation could contribute to address immediate challenges of the sector such as low profitability and non-performing loans and will debate the need for transparency in encouraging sustainable consolidation projects.
* The views and opinions expressed in this video are those of the speakers or authors in their personal capacity and do not necessarily reflect the official position of the Robert Schuman Centre or the European University Institute. *
