German financial watchdog says banking union no precondition for bank mergers

FRANKFURT, Dec 3 (Reuters) – A completion of Europe’s banking union with the creation of a joint deposit protection scheme is not a precondition for cross-border bank mergers, the head of German financial watchdog Bafin told daily Handelsblatt.

“If a cross-border merger makes economic sense, it will not fail because the third pillar of the banking union is not yet complete,” Felix Hufeld told Handelsblatt.

“The fact that there have hardly been any such mergers so far is primarily due to their high complexity and doubts about their economic sense”, he added.

While Europe has recently seen banking consolidation on a national level, a few cross-border deals have emerged with bankers often pointing to the lack of a joint deposit protection scheme as one of the reasons.

Bafin’s Hufeld added that he does expect cross-border mergers in the longer term, but no short-term deals unless an emergency arises which needs quick action.

Reporting by Arno Schuetze Editing by Riham Alkousaa

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