Merger activity in the euro zone bank sector is likely to accelerate given rapid economic growth and a reduction in soured debt, European Central Bank supervisory chief Daniele Nouy told a Portuguese newspaper.
The ECB has long complained that Europe is overbanked, reducing the sector’s efficiency and keeping profits down, a problem since weak banks cannot fully transmit the central bank’s ultra-easy monetary policy to the real economy.
“I think that with growth returning and with the huge amount of work that is being done in relation to non-performing loans, we are going to see a number of mergers taking place within countries and across borders,” Nouy was quoted as saying by Público on Monday.
Nouy also defended ECB efforts to bring down the level of non-performing loans but said new guidelines on newly soured credit may be delayed by a few months after receiving industry feedback.
“I think this process of analysis will take a month or two,” Nouy said. “It is therefore very likely that implementation will be postponed by a few months.”
“However, I would say that it doesn’t change much whether it happens on say 1 January, 1 April or 1 June,” she said, adding that there was no reason for a delay until 2019.
Sources close to the discussion earlier told Reuters that the new rules, due to take effect on Jan. 1, could now wait several months or possibly another year.
Despite the delay, Nouy said a separate proposal to deal with around 800 billion euros of already sourced credit would come in the first quarter as planned, even if the outlines of that proposal are still uncertain.
“We are planning to publish something on the quantitative expectations regarding legacy stocks at the end of the first quarter next year,” Nouy said.
“I am not exactly sure what that will be, because I have not seen the work of the ECB’s high level group that is analysing non-performing exposures,” she added.
For the text of the interview, click on: https://www.bankingsupervision.europa.eu/press/interviews/date/2017/html/ssm.in171211.en.html
Source: Reuters (Reporting by Balazs Koranyi; Editing by Hugh Lawson)