April 10, 2019 / 1:47 PM / 5 months ago

ECB's Draghi says European bank sector needs significant consolidation

Mario Draghi, President of the European Central Bank (ECB) holds a news conference on the outcome of the Governing Council meeting at the ECB headquarters in Frankfurt, Germany April 10, 2019. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) - Europe’s banking sector is overcrowded and in significant need of consolidation, ECB President Mario Draghi said on Wednesday.

The sector needs to take a series of actions to improve its business model, he told a post-policy-meeting news conference.

“That can be achieved however only through consolidation.... (and) the need for consolidation is very, very significant,” he said.

“There is a relationship between scale and the capacity to undertake the investments that are needed to improve technology and be competitive, especially in certain business models.”

Asked about the European Central Bank’s supervisory role in mergers, he said the main priority was for transactions to be successful, meaning not only pleasing to shareholders but also creating a strong business entity.

Answering a question, Draghi said, without referring to specific transactions, that the bank had no preference between cross-border and national banking mergers.

Deutsche Bank and Commerzbank - Germany’s top two lenders - said in mid-March they were in merger talks.

Deutsche has come under pressure to move forward with a deal after two sources told Reuters last week that, if the talks fell through, Italy’s UniCredit could explore a merger with Commerzbank.

Writing by John Stonestreet; Editing by Hugh Lawson

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