Downsizing and consolidation continues to be the trend in the EU banking sector

The ECB’s annual report on banking structures shows that consolidation remains the most important structural development in the EU banking sector.

The consolidation process that began in the 1990s is still producing downsizing in the European Union, according to a report published by the European Central Bank. The report, prepared by the banking supervision committee of the European System of Central Banks (ECSB), reviewed the main structural developments in the EU from 2005 to the middle of 2006.

Domestic consolidation and concentration levels continued to rise throughout 2005, as did cross-border mergers and acquisitions in both the retail and wholesale market.

The report also concluded that cross-border banking activities have strengthened competition and have been the cause for more diversification. The paper finds these advantages outweigh cross-border challenges, and stresses that banks maintain consistent risk management frameworks.

The report also noted the importance of regulatory changes in the EU, particularly regulation contained in the Financial Services Action Plan (FSAP) such as the Capital Requirements Directive (CRD), the Markets in Financial Instruments Directive (Mifid) and the Lamfalussy process to the structural framework of the banking sector.

Click here to see the report in full on the ECB’s website.

BaselAlert.com

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