By David Shirreff
Over the past 25 years, smaller European countries have gradually opened up their retail banking sectors by allowing in foreign competitors and harmonising rules with their neighnours. But in some of the bigger member-states, there has been resistance to change. As a result, Europe's retail banking sector is still highly efficient.
The European Commission should keep using its competition powers to take on vested interests and national prejudices as it has done in the past. But, whenever possible, it should adopt a light-touch approach to new legislation.
European regulators should create a framework in which each business within a bank has its own profit-and-loss account and its own dedicated capital. This would increase the scope for cross-border acquisitions and alliances below the level of mega-mergers.
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