JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said European banks should look beyond their borders for mergers to take advantage of the full economic power of the region, according to a report by Bloomberg.
“If politicians fight it, they’ll be sub-scale forever, and that’s not good for their economy,” Dimon said on Thursday (March 14). “They should really think through the choices here and allow these banks to merge and go pan-European.”
Saying there is “some truth” to the notion that Europe is overbanked, Dimon put the blame for that on the European Union and its regulations for slowing the consolidation of financial institutions.
“These banks need to merge to have the kind of scale, diversification,” Dimon said, “but it’s hard to do if you don’t finish regulations like the single regulatory mechanism, the insurance mechanism.”
Germany currently has two banks that are informally considering a merger: Deutsche Bank AG and Commerzbank AG. The European Central Bank would prefer a cross-border combo that would let Deutsche push integration into the area’s markets, but some German officials would rather have a national banking giant.
Labor reps, however, are against the deal because it could mean the potential loss of 30,000 jobs.
“Even in Germany, if you don’t allow consolidation, you have to allow them to become efficient,” Dimon said. “That does mean layoffs. It’s better for the long-term health of the industry, it’s not good in the short-run, particularly for those people, and I’m very sympathetic to that. That’s a political issue, not a regulatory issue, so both sides have to think about what they really want one day.”
JPMorgan is the largest bank in America, and it has grown bigger and taken share from European banks while they struggle. The institution is on the way to becoming the number one global company in revenue from its investment banking and trading.