The role of banks in the economy is to carry out monetary transactions, e.g. taking in deposits from individuals, granting commercial loans and financing productive investments. During the 1990s the banking world in Europe underwent the “3-D” revolution: deregulation, disintermediation and despecialisation. Nowadays banks can offer their customers the full range of financial services, including savings, loans, mortgages, insurance and securities. Their activities have come in for close scrutiny from the national and European legislators since the financial crisis of 2008-2009.
Over the past 15 or 20 years the European banking sector has undergone sweeping changes: a huge diversification of its business activities, numerous mergers of institutions (especially owing to the completion of the European single market and the single currency), an increase in the size of establishments and enhanced competition. There has been a fall in the number of banking institutions (9,770 in 1993; 8,348 in 2007) but they have grown in size. As a result the sector is becoming ever more concentrated: in 2007 the five largest banking institutions accounted for 44.3% of the EU’s total assets (European Central Bank, EU Banking Structures, October 2008).
The financial and economic crisis of 2008 certainly shook up the league table of the most highly capitalised European banks, but the sector is still highly concentrated – if not even more so than before (HSBC and Barclays in the United Kingdom, Santander in Spain, BNP Paribas, Crédit Agricole and Société Générale in France, Crédit suisse, UBS, ING and ABN Amro in the Netherlands, etc.).
Employment was on the increase until 2007, when it peaked at approximately 3.18 million workers, but the financial crisis brought about heavy job losses in 2009. UNI-Europa estimates that 200,000 banking jobs may have fallen victim to the crisis in Europe and North America.
The first point of note from a European perspective is that the banking sector, and above all retail banking, is not particularly integrated Community-wide. 71% of all bank assets across the EU are held by domestic credit institutions. Whereas there is very little involvement of foreign players on domestic markets in the eurozone countries, they are much more heavily involved in the central and eastern European countries, where subsidiaries of eurozone banking groups play a major role.
In addition, although most mergers and acquisitions take place between national banking institutions, cross-border takeovers have become a growing phenomenon since 2003 (buyout of the UK bank Abbey National by Santander in 2004, of the German bank HVB by UniCredito Italiano in 2005, takeover of the Dutch bank ABM AMRO Holding by the Royal Bank of Scotland, Fortis and Banco Santander in 2007, buyout of Fortis by BNP Paribas in 2008, and so on).
One of the main goals of EU legislative activity since the late 1990s has been to promote financial integration in Europe. The Commission has for example sought to align supervisory practices and has been attempting, especially since 2005, to enhance competition among service providers within the EU, particularly on the retail markets. It has moreover drawn up a proposal for a directive to harmonise the handling of merger and acquisition requests within the EU, in order to minimise the regulatory obstacles and political interference in this sphere.
This policy agenda has however been disrupted by the financial crisis. Initially the crisis led to substantial intervention by governments to prevent banks from failing, and to a consolidation of the sector (buyout of Dresdner Bank by Commerzbank and of IKB by Lonestar in Germany, merger of the Caisse d’Epargne and Banque Populaire groups in France, buyout of Fortis by BNP Paribas). Thereafter the need for tighter supervision and regulation, preventing so-called “systemic” banks from taking unwarranted risks that endanger the economy as a whole, became a political priority. But, as long as certain Member States continue to jealously guard their national prerogatives in this sector, it will remain very tricky to implement this political priority.