German Central Bank: Mergers Must Yield ‘Robust’ Competition

The chief of Germany’s central bank wants bank mergers to produce robust, competitive institutions.

“We need strong and robust banks so that companies can tackle and finance their future tasks,” Bundesbank chief Joachim Nagel said while addressing a Commerzbank event in Frankfurt on Wednesday (Sept. 18).

“In case of possible mergers, it is important that a competitive institution is created which fulfills this task as best as possible,” added Nagel, whose comments were reported by Reuters.

As that report noted, the speech happened as UniCredit is considering a takeover of Commerzbank, a move that has caught regulators off guard and drawn an unfriendly reaction from the bank’s local management.

Nagel did not mention either bank by name, Reuters added, but pointed out that any comment from the central bank is likely to gain attention. That’s because the Bundesbank has a seat on the European Central Bank’s supervisory board, and the ECB must sign off on the merger.

UniCredit, based in Italy, is one of Europe’s best capitalized banks, the report added, and likely has the financial capacity to engineer the merger. But the deal would be politically charged, Reuters said, as the German banking industry is dominated by two large lenders: Deutsche Bank and Commerzbank.

Earlier this year, ECB governing council member François Villeroy de Galhau told Reuters that mergers of banks in different European countries should be no more difficult than those between banks in the same country.

“It would be desirable, logical and normal that cross-border mergers within a monetary union would be as simple and accessible as a merger (within the same country),” Villeroy said.

His comments followed ones from French President Emmanuel Macron, who argued that consolidation among European banks is necessary to boost the European Union’s economic prowess on the world stage.

In related news, the U.S. Federal Deposit Insurance Corp. (FDIC) this week announced that new rules would be adopted to change the way proposed mergers are considered, especially when it comes to risk.

As PYMNTS wrote, the FDIC’s document makes special mention of industry consolidation, with the agency noting that it “recognizes that mergers in rural areas involving local community banks may result in concentrated markets.”

The FDIC stressed it would carefully weigh the competitive effects of such a merger with the “public interest served by the capacity of the resulting institution to serve the convenience and needs of the community.”