France backs European bank mergers before key meeting

Bloomberg

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, 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 neighbourhood 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 signalled 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 finalise a roadmap so national leaders can start negotiations next year.
After seven years during which fiscally conservative northern European countries have been deadlocked with neighbours 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 foreig 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. Consolidation could include foreign stakes in a French bank, but national champions are solid enough to be the ones buying others.