The European Central Bank has urged euro area lenders to merge across national borders, arguing that banking in the bloc remains too fragmented to compete with the United States.
ECB Vice-President Boris Vujčić, who took over from Spain’s Luis de Guindos in June, made the case in a keynote speech to the 10th annual conference of the European Systemic Risk Board (ESRB) in Frankfurt today.
The euro area banking sector had become more concentrated over the past decade, he said, though the process had been driven mainly by domestic mergers and acquisitions. Concentration at EU level remained lower than in the US, and the deals that did cross borders tended to involve neighbouring countries.
Vujčić called that “a missed opportunity”, citing research suggesting that banks involved in takeovers improve their profitability and cost efficiency and spread their assets and revenues more widely.
What the ECB is asking for, in practice, is a smaller number of larger banks. Every merger removes a competitor from the market, leaving savers, households and small firms with fewer lenders bidding for their business and fewer places to go when one of them says no.
The comparison the ECB keeps making cuts both ways. Vujčić acknowledged that euro area banks operate on average with lower lending margins than American ones, which means the deeper, more concentrated US market he holds up as the benchmark is also the market where borrowers pay more.
National authorities have made much the same objection. BBVA’s hostile bid for Banco Sabadell was cleared in Spain only after commitments on branches and lending to small businesses, and the Spanish Government added a condition keeping the two banks separate for three years, before shareholders rejected the offer in October 2025.
Cross-border lending to companies within the euro area accounted for only around 16 per cent of total corporate lending, Vujčić said, less than the roughly 20 per cent lent to firms outside it, mostly American and British. Integration would cut borrowing costs and let banks spread earnings and risk across several countries, he argued.
He also pressed member states to complete the European deposit insurance scheme (EDIS), the missing third pillar of banking union, proposed by the European Commission in 2015 and blocked by national capitals ever since.
Vujčić rejected the industry’s claim that capital rules are the obstacle. Median Tier 1 capital had more than doubled since 2009, to more than 16 per cent, and lower requirements would be unlikely to produce more lending.
The wider gap with Wall Street lay in capital markets, where European banks have been recruiting American dealmakers to claw back lost ground. Cross-border investors still face 27 separate withholding tax regimes and divergent insolvency rules.
