Series
Blogs
Series
Blogs
M&A among EU banks has surged in recent years, undeterred by broader market volatility triggered by US tariff actions. There are a number of business drivers behind this development:
At the EU political level, there is support for cross-border consolidation. In his influential Report, former head of the European Central Bank, Mario Draghi, highlighted that EU banks are crucial for the EU’s renewed strategy – not least because bank loans remain the most important source of external finance for EU companies. At the same time, the ability of EU banks to finance major investment is constrained by their relatively small scale. The largest US bank (JP Morgan) has a larger market capitalisation than the ten largest EU banks combined. Draghi therefore concludes that “Banks with a truly continental span of operations would not only better support European companies that operate in multiple EU Member States, but they are also the necessary players on integrated capital markets, in underwriting securities, taking companies public, and assisting them in M&A operations.”
However, while there is support at EU level for consolidation, banking deals may still face regulatory hurdles, both for cross-border and domestic consolidation.
Domestic mergers may raise concerns from a competition perspective over market power and oligopolistic market structures and potentially a stagnation in service innovation.
Several competition authorities in the EU, notably in Belgium and the Netherlands, have voiced concerns around a lack of competition in the retail banking industry, as reflected for example in low savings rates for consumers. In France, this has led to the imposition of margins within which the banks must keep their interest rates on savings accounts. Against that background, it is unsurprising that the merger of BBVA and Banco Sabadell in Spain, was only cleared by the Spanish competition authority subject to an extensive remedy package.
This position is unlikely to change. While Mario Draghi and President von der Leyen have called for a “new approach” to EU competition policy that is “better geared to our common goals and more supportive of companies scaling up in global markets”, this is not a carte blanche for M&A that would otherwise be considered anti-competitive. Support at EU level is primarily directed at cross-border rather than domestic M&A, a position we have also seen in other sectors (e.g. telecommunications). The European Commission is likely to remain sceptical about whether domestic M&A is necessary to achieve scale, innovation, resilience and/or efficiencies (all themes that feature prominently in the ongoing review of the Commission’s merger guidelines) among EU banks, when cross-border M&A is considered a viable and equally effective alternative that maintains competition and contributes to completing the Banking Union.
A hurdle to cross-border M&A remains the lack of a true Banking Union and a common deposit scheme in the EU. This makes synergies for cross-border consolidation less obvious, attractive, and explains the current ‘home bias’ of EU banks and the fragmentation of credit markets along national boundaries that has (so far) been a hallmark of the European financial system. Executive Vice-President Ribera – in charge of EU competition enforcement – recently noted that “there is clearly room for cross-border consolidation (…). But for this to happen we need a true single market for banks.”
Beyond this, national (political) opposition can be a genuine sticking point. For example, triggered by UniCredit’s hostile takeover attempt of Commerzbank – and not withstanding that Germany’s Federal Cartel Office and the European Central Bank had already unconditionally approved the takeover – the German government denounced hostile takeovers as unfavourable to banks. This national political sentiment stands in the way of the creation of European ‘super banks’, despite market appetite. As one commentator summarised, the current sentiment in capitals across the EU: “Acquire abroad? Yes. Be taken over by foreigners? No thank you.” The former head of DG COMP, Olivier Guersent, also noted recently that while some EU Member States “sing the gospel" on integrating financial markets and creating a single capital space across the EU, when push comes to shove, they protect their own banks and “do not put their money where their mouth is”.
The Commission is recently pushing back against national governments intervening in banking M&A. That was not always apparent, after a string of national political and legal interventions which hampered consolidation in the banking sector over the past years.
EU banking M&A now stands at a crossroad. While scale is vital, concentration carries (antitrust and political) risk. Regulators must find and maintain an equilibrium which is not easy to define. Interference by national governments also makes the path to deal success and value creation less predictable. The actions of the Commission against the Italian and Spanish governments shows that the Commission is determined to promote cross-border consolidation and complete its Banking Union. This is clearly a space to watch.
In any case, a government affairs strategy is increasingly essential to support the legal and economic case for a merger in this sector. Success requires detailed jurisdiction-specific insight, including awareness of the personal and political priorities of key decision-makers. Understanding the geopolitical dynamics and interactions between jurisdictions is equally crucial, as these often influence outcomes.
26 September 2025
Up next