Financial Integration and Cross-Border Banking Mergers in the European Union

Résumé du document

On March 30, 2005, the Dutch bank ABN Amro launched a bid to acquire the small Padua-based Italian bank Antonveneta. ABN Amro clearly had a number of reasons to make such an offer: it was trying to expand its activities in the European Union through mergers and acquisitions, while the Italian market showed good prospects of growth and was highly profitable due to high banking fees. Moreover, Antonveneta did not seem hostile to this bid: ABN Amro already controlled 4 out of the 15 seats of its board and merging with one of the biggest banks in the European Union could only help Antonveneta achieve its growth and profitability objectives. However, ABN Amro's plans did not quite go as expected, since Lodi's bank, a very small Italian bank, made another offer to acquire Antonveneta, mainly because, according to its Chief Executive Officer (CEO), Gianpiero Fiorani, "Italian banks must remain in Italian hand1".

Extraits

[...] For instance, in France or in Germany, traditional checking and savings accounts account for more than 50% of the profits, whereas in other countries, such as Spain or Ireland, lending activities are the most important function of banks. This hence creates additional difficulties for potential cross-border banking activities, which must adapt thoroughly to the local and specific needs of the various customers they serve. Another factor to be taken into account to explain the lack of integration of the European Union's financial market is that governments or national central banks often are reluctant to authorize such operations. [...]

[...] For all of these reasons, and even though the Royal Bank of Scotland-Fortis-Santander acquisition of ABN Amro may have given some hopes to a few observers, it may be thought that future prospects for cross-border banking mergers remain dark in the European Union, especially given the current financial crisis context. Moreover, current debates in the European Union are more focused on the coming European elections or the adoption of the Lisbon Treaty, probably because facilitating cross-border banking mergers would perhaps not be seen as an important issue by European citizens, especially, again, because of the current financial context. [...]

[...] Although it has extensively communicated on its desire to improve cross-border banking mergers in the European Union, to date, the European Union has not taken any effective and precise steps to make such operations smoother. Green papers, white papers, directives and action plans have been written, but have never really helped smoother the cross-border mergers process in the banking sector. For instance, identifying an European institution, such as the European Central Bank, as the one responsible for promoting and supervising such mergers would help. [...]

[...] Supervisors in a country hosting the operations of a bank from another may have little idea of its health. Those in its home country, meanwhile, may have little interest in what happens abroad if it fails12”. In this regard, Dexia a French, Luxemburg and Belgium bank provides an interesting example of how difficult it is for multinational European banks to resist in difficult times: to negotiate Dexia's 6.4 billion bailout, its top managers did not have to negotiate with one country, but with three, which all had different positions about what the future of the bank should be13. [...]

[...] Since then more banking directives have been adopted (two in 1989 - the Own Funds and Second Banking directives two in 1992 the Consolidated Supervision and Large Exposure directives and one in 1996 the Netting directive). In 2000, all of these directives have been consolidated into a single directive, the Consolidated Banking Directive16. Over the years, these directives have mostly sought to help promote financial integration in the European Union through the creation of common legal frameworks for cross-border operations (mostly in the 1977 and 1989 directives) and through the “Expert Group on Banking, Financial Services Action Plan: Progress and Prospects, Final Report,” May 2004 “Expert Group on Banking, Financial Services Action Plan: Progress and Prospects, Final Report,” May 2004 Directive 2000/12/EC harmonization of capital ratios, own-funds requirements and reporting procedures (mostly in the 1989 and 1992 directives). [...]