Tuesday 20 August 2019

Too many banks a risk, ECB VP warns

The headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photo: REUTERS
The headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photo: REUTERS
Donal O'Donovan

Donal O'Donovan

MOVES towards a European banking union could be derailed, while the lending sector risks dangerous fragmentation because banks have pulled back from cross-border deals, European Central Bank vice-president Luis de Guindos has warned.

Ireland is among the eurozone countries that saw banks owned elsewhere in the European Union exit in the wake of the financial crisis.

Please log in or register with Independent.ie for free access to this article.

Log In

Those which departed included Bank of Scotland, Danske Bank and Rabobank. In the same period Irish banks reversed some of their cross-border ventures, with AIB selling its Polish subsidiary. National rules in some countries still hinder cross-border banking consolidation and the ECB thinks fragmentation leaves lenders less able to compete with global banks.

"Euro-area-based banks have substantially reduced their cross-border claims since the crisis, and about 60pc of banks' total exposures are to their home countries," Mr de Guindos told a conference in Brussels yesterday.

"This is worrying at a time when the political momentum behind completing the banking union is fading," he said.

"This may lead banks to refocus their activities on their domestic markets as they anticipate that the banking union will remain incomplete, resulting in further fragmentation."

Additional reporting Reuters

Irish Independent

Also in Business