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France added to the growing chorus of lawmakers and executives seeing consolidation as an avenue to revive Europe’s ailing banks, ahead of a key meeting that may jumpstart a plan to create a single market for the industry.
Prime Minister Edouard Philippe, speaking in an interview in Paris on Tuesday, said mergers to create “critical-size, global actors” in European finance would be a “good thing.” He backed a call by German Finance Minister Olaf Scholz to complete the project for a banking union that would make such deals easier.
“Everything that is giving sense to the European Union -- to this exceptional market of 500 million consumers -- in trade, norms and finance, is welcome,” he said in the interview at his office in an upscale neighborhood on Paris’ Left Bank, while declining to discuss the proposal in detail. “At every level, it’s important that Europe takes stock of its power.”
Scholz last week signaled Germany may give up its opposition to a key part of the plan for European banking integration as lenders such as Deutsche Bank AG struggle to compete a decade after the financial crisis. But his proposal has yet to be endorsed by the government in Berlin, while a key condition -- stricter rules on banks’ sovereign debt holdings -- has already irked Scholz’s Italian counterpart.
The banking union project will be discussed in more detail at a December meeting of European finance ministers, who want to finalize a roadmap so national leaders can start negotiations next year. After seven years during which fiscally conservative northern European countries have been deadlocked with neighbors in the south, progress may be slow.
Then there’s the question of who would do the consolidating. France has in the past tried to protect key companies and industries from foreign takeovers. Philippe suggested French banks may be in a strong position to acquire rivals once the regulatory framework is in place.
‘I Will Rejoice’
“I know some French banks have a reputation of being very innovative and, for some, very competitive,” he said. “If their growth strategy includes alliances, mergers or acquisitions with European or non-European institutions, if these are smart and well-crafted operations, I will rejoice.”
While Societe Generale SA has indicated that it would be interested in playing a role in European banking consolidation, the lender is undergoing a radical restructuring to shrink its investment bank. BNP Paribas SA is seen as being in a stronger position to play a role in European consolidation and was two years ago linked with a possible bid for Germany’s Commerzbank AG.
France, while backing consolidation in the banking sector, believes its institutions are in a position to be buyers rather than targets, an official in the government said. Consolidation could include foreign stakes in a French bank, but the country’s national champions are solid enough to be the ones buying others, according to the official, who spoke on condition of anonymity.
Europe’s banks have fallen behind their Wall Street peers since the global financial crisis in 2008, as stricter regulation and negative interest rates erode profitability. Even U.S. competitors such as Goldman Sachs Group Inc. have said Europe would benefit from a local banking champion.
Jean Pierre Mustier, the chief executive officer of UniCredit SpA, said in an interview that consolidation in European banking is dependent on higher stock prices because firms need to raise capital for deals. UniCredit was among firms seen as a possible suitors for Commerzbank earlier this year after the German lender’s merger talks with Deutsche Bank broke down.
“What needs to happen in Europe for more consolidation is probably for the bank shares to go up, then we might look at it,” Mustier said in a Bloomberg Television interview with Francine Lacqua taped on Tuesday. “One way or another you need to issue capital when you consolidate.”
For France, deeper integration of the banking sector is an “absolute priority” and a question of sovereignty so that Europe’s economy doesn’t depend on foreign banks’ willingness to finance it, the French finance ministry said last week in response to the German proposal.
President Emmanuel Macron’s premier sees the creation of large European banks as part of a broader call for continental champions. He said the European Commission, the executive branch of the EU, has so far had a “conservative approach” about consolidation to preserve competition within the bloc and protect consumers.
“It poses a problem, it strips Europe from operators that would have the critical size on global markets,” he said, citing the planned merger of Alstom SA and Siemens AG that was shot down on ground it would create a dominating actor.
He reiterated his call to EU Commissioner antitrust chief Margrethe Vestager to revise a “static” position on competition toward a “dynamic” one that would take into account global competition.
“It’s in the interest of the EU to see competition rules evolve,” he said. France, he added, would seek to push the EU to reform its policies.
(Updates with comments from UniCredit CEO Mustier from 11th paragraph.)
--With assistance from Rosalind Mathieson.
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