Europe needs bigger, stronger banks capable of competing with their American and Chinese rivals, Christine Lagarde, president of the European Central Bank, said on Monday, just as Italy’s UniCredit was considering buying Germany’s Commerzbank.
UniCredit, Italy’s second-largest bank, is pushing for a tie-up between the lenders after taking a stake in Commerzbank earlier this month, sparking criticism from the bank and Germany’s political establishment, which wants to maintain independence of the lender.
Lagarde said it was in Europe’s interest to scale up and private sector players needed to decide whether or not to strike deals.
“Cross-border mergers, that is, banks that can really compete with other institutions in the world, including American banks and Chinese banks, are in my opinion desirable,” Ms. Lagarde said during a parliamentary hearing.
She added that her comments should not be taken as direct intervention in any particular operation.
According to some sources, ECB politicians are in favor of the principle of the agreement and consider that Berlin’s opposition goes against the principle of European integration.
Speaking to the European Parliament’s Economic and Monetary Affairs Committee, Lagarde said mergers carried some risks, but it was up to the private sector to decide whether a deal was wise.
“Cross-border mergers, if they produce larger institutions that are more agile, that have more scope, that have more depth, have a lot of advantages,” Ms. Lagarde said.
“It’s not without responsibility, without potential risks, but of course it’s up to those responsible for these initiatives in the private sector to measure all of this and determine whether it makes sense or not,” she added. .
The ECB’s supervisory body will ultimately have to approve UniCredit’s plans to increase its stake in Commerzbank and the rate-setting Governing Council will also have to approve any merger.
