ECB: Europe needs bigger and stronger banks to compete with the US and China

Europe needs bigger and stronger banks that can compete with credit institutions in the US and China. This was expressed by the President of the European Central Bank, Christine Lagarde, at a hearing before the Economic and Monetary Affairs Committee of the European Parliament, reported Reuters and France Press, cited by BTA.

Lagarde’s statement came after the information about discussions about the possible merger of the German bank Commerzbank and the Italian UniCredit. The Italian lender recently increased its stake in Komerzbank to more than 21 percent, announcing plans to continue buying shares until the stake reaches 29.9 percent. However, the final union met with resistance both from the German bank and from the majority of politicians in Berlin.

According to Lagarde, consolidation is in the interest of Europe and the private sector should decide whether to proceed with these contracts.

“Cross-border mergers – banks that can compete in scale, depth and breadth with other institutions around the world, including US and Chinese banks – I think are in- Desirable,” Lagarde told the EP committee, adding that her comments should not be taken as a direct intervention in a specific matter.

Unions have certain risks, but the private sector must decide whether the agreement makes sense, she said.

“Cross-border mergers have many advantages, if they create larger institutions that are more flexible and have a larger and deeper scale,” Lagarde said.

This is not without potential risks, but, of course, entrepreneurs in the private sector must evaluate all this and find out if it makes sense (from such contracts – note) or not ,” she explained further.

Regarding inflation, Lagarde said that the European Central Bank is increasingly confident that inflation will fall to the 2 percent target and that this should be reflected in the upcoming October interest rate decision.

The ECB has already cut interest rates for the first time in June, as well as once more earlier this month.

“The latest data reinforces our confidence that inflation will return to the target over time,” which will be noted at the ECB’s monetary policy meeting in October, Lagarde said.

She also addressed a series of weak data on economic growth in the euro area, describing it as “headwinds”.

However, Lagarde said the recovery is expected to strengthen and rising real incomes will allow families to consume more.

She said the labor market, which has suffered some price pressures from rapid wage growth, remains stable even as wage growth slows and corporate profits absorb some of the salary increases.