BUCHAREST (Reuters) – Lower capital requirements for European subsidiaries of EU banks would help encourage the emergence of more cross-border banks, ECB policymaker Francois Villeroy de Galhau said on Friday.
ECB officials have long called for cross-border consolidation among European banks, which they believe would help credit flow to countries needing it most, making their monetary policy more potent.
But such consolidation is slow because bankers say that current regulations tie up to much capital in their European subsidiaries for cross-border mergers to make sense.
“We will not achieve an effective and profitable Banking Union without cross-border consolidation in Europe: there are still too many roadblocks and not enough cross-border restructuring,” Villeroy said in a speech at financial conference in Bucharest.
“A useful step towards forming genuine pan-European banking groups could be to lower capital requirements of European subsidiaries, while safeguarding their financial position through credible cross-border guarantees provided by the parent company,” added Villeroy, who is also head of the French central bank.
(Reporting by Leigh Thomas)