The European Union’s failure to complete banking union is putting the continent’s lenders at a strong disadvantage, according to UBS Group AG Chairman Colm Kelleher.
(Bloomberg) — The European Union’s failure to complete banking union is putting the continent’s lenders at a strong disadvantage, according to UBS Group AG Chairman Colm Kelleher.
“Europe is massively losing out competitively to the US banking system” because it can’t break down national barriers to banking, Kelleher said on a panel at the World Economic Forum in Davos on Wednesday. The region “needs a markets-based banking system,” he said.
Kelleher’s comments underscore the importance many bank executives attach to the EU’s effort to allow more banking services across the entire bloc under a so-called banking union that many say has been to slow to materialize and which is also hindering much needed M&A in the fragmented European banking sector. Banking union, they say, would make it less costly for them to operate in the region while creating a bigger market — and hence economies of scale.
The banking union would also facilitate cross-border takeovers, according to executives including Deutsche Bank AG Chief Executive Officer Christian Sewing. A lack of scale compared with US rivals is among the structural problems faced by many European banks. Kelleher said that UBS has a “global strategy” and that the Swiss bank hasn’t been impeded by regulation put in place after the 2008 financial crisis.
The European Union has repeatedly tried and ultimately failed to complete banking union since publishing a roadmap for it a decade ago. The latest attempt foundered last year.
The creation of a joint deposit insurance has long been the main obstacle, with countries like Germany fearing that it would create a risk-sharing structure that will put their taxpayers on the hook if banks in other countries go bust. Still, some large failures including that of Greensill Bank two years ago happened recently in Germany.
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