31 January 2006

ECON Hearing on further consolidation in Financial Services Industry

ECON held an open Hearing on the further consolidation in the financial services industry in Brussels. In his opening speech Commissioner McCreevy lined out that “cross-border consolidation is not an objective in itself. But the small number of cross-border mergers and acquisitions in the financial sector compared to other sectors is a source of concern”.

The Commissioner stated that “the rules for the supervisory approval processes must be streamlined and made more transparent”. “A second challenge is to give our financial institutions more liberty and flexibility to expand and re-organise themselves on a pan-European basis” he added. Finally, further progress in the integration of retail financial markets has to be made to foster efficiency and competition.

During the hearing committee members received mixed reports from the experts. Mr Ravoet, Secretary General of the European Banking Federation, mainly referred to banking supervisory issues. Among others, he criticised the misuse of supervisory powers and the multiple regularly requirements and called for a strong framework to enhance supervisory efficiency. He also noted that cooperation among regulators is yet not existent. Finally, the difference in the VAT treatment in the Member States are a major obstacle towards further consolidation.

Mr Mifsud, former Chairman of MidMedBank in Malta, reported on the experience of takeovers within small markets which may lead to reduced competition. In his opinion depositors and SMEs suffered most from the takeover. Mr Karlberg, Ombudsman of the Confederation of Nordic Bank, Finance and Insurance Unions reported on the Nordic experience and called for smooth transition programs to soften the changeover and possible negative effects of further consolidation.

Mr Jaschinski on the other hand, Chair of the Board of Managing Directors of the German LBBW, said that further consolidation would be contra productive to the German economy, particularly SME would be discriminated. He referred to differences in culture within the Member States and called for a regulatory pause in general.

Finally, Mr Lanoo fm CEPS stated that insufficient competition within the sector is already proved. A series of impediments still exist. These include the enforcement of existing rules, the standardisation of reporting requirements, the retail market, and tax disincentives.

The documents of the hearing can be downloaded below

Speech McCreevy
Mr Siegfried Jaschinski , Chairman of the Board of Managing Directors, LBBW
Mr Per Karlberg , Ombudsman, the Confederation of Nordic Bank, Finance and Insurance Unions
Mr Manuel Gonzáles Cid , Chief Financial Officer, BBVA
Mr Alfred Mifsud , former Chairman of Mid Med Bank Malta
Mr Guido Ravoet , Secretary General of the European Banking Federation + Enclosure
Mr Lamberto Cardia , Chairman of the CONSOB

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