ECB pledges to remove hurdles to bank mergers in euro zone

© Reuters. Specialists work on a crane in front of the European Central Bank (ECB) in Frankfurt

FRANKFURT (Reuters) – The European Central Bank’s chief supervisor pledged on Thursday to remove some hurdles to cross-border bank mergers in the euro zone, such as restrictions on moving cash between subsidiaries in different countries.

The ECB has long been calling for consolidation in a sector struggling to make money due to low interest rates and high costs from its bricks-and-mortar network of branches.

But mergers between banks in different countries have been few and far between, partly due to the patchwork of national requirements on liquidity and capital, and to the lack of a common deposit protection scheme.

“ECB Banking Supervision is considering a range of options, such as enhancing the possible role of group support agreements for subsidiaries in (a) banking group’s recovery plans,” Andrea Enria told bank representatives in Frankfurt.

“We are also open to facilitating the granting of cross-border liquidity waivers at the solo level to the extent possible within the current legislative framework.”

His words will be music to the ears of Italy’s UniCredit (MI:), which has tried for years to draw cash from its German subsidiary HVB but met with resistance from German supervisor Bafin.

Enria said the ECB would also make it easier for banks to treat some of their operations in other euro zone countries as branches, which implies less scrutiny from local supervisors.

“Although these are preliminary thoughts, I hope they convince you that ECB Banking Supervision is seriously committed to promoting an integrated European banking sector,” he told a joint meeting of the ECB’s top supervisors and lobbyists from the European Banking Federation.

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