Europe requires larger and more robust banks capable of competing with their American and Chinese counterparts, according to European Central Bank President Christine Lagarde. This statement comes as Italy's UniCredit is considering a potential takeover of Germany's Commerzbank. UniCredit, Italy's second-largest bank, is pushing for a merger between the two banks after acquiring a stake in Commerzbank earlier this month. This move has drawn criticism from both Commerzbank and Germany's political establishment, which aims to maintain the lender's independence.
Lagarde emphasized that expanding in scale is in Europe's best interest and that it should be private sector entities that decide whether to proceed with such deals. 'Cross-border mergers – banks that can actually compete at a scale, depth, and range with other institutions around the world, including American and Chinese banks – are, in my opinion, desirable,' Lagarde stated during a Parliamentary hearing. She clarified that her comments should not be interpreted as direct intervention in any specific deal.
Sources previously indicated that ECB policymakers generally support the deal in principle, viewing Berlin's opposition as contrary to the principle of European integration. Addressing the European Parliament's Committee on Economic and Monetary Affairs, Lagarde acknowledged that mergers come with risks but should be evaluated by the private sector to determine if a deal is viable. 'Cross-border mergers, if they result in larger, more agile institutions with greater scale and depth, offer numerous benefits,' Lagarde noted. 'While not without liabilities and potential risks, it is ultimately up to the private sector to assess all factors and decide if such a deal makes sense.'
The ECB's supervisory arm will need to approve UniCredit's plans to increase its stake in Commerzbank, and the rate-setting Governing Council must also approve any merger.
