LONDON (Reuters) - The European banking system still operates with excess capacity after the financial crisis and there is room for more mergers to increase efficiency but not create ever-larger institutions, European Central Bank supervisor Andrea Enria said on Thursday.
"The optimal size of the banking sector is hard to gauge, but it seems clear, though, that the European banking sector is still too large," Enria told a conference in Lisbon.
"So there is a need for consolidation."
He said that after a crisis "consolidation can help to mop up excess capacity."
"However, this is not about creating ever-larger banks. It is about more efficient banks, and the banking sector needs to be diverse in terms of dimension," he said.
In some cases "the room for consolidation is particularly relevant in the mid-size and lower-size of the scale", he said.
He said decisions on consolidation should be taken by managers and shareholders and that it is not up to regulators to say what the right size of the banking sector is, "but there is an impression that excess capacity is still there".
"This is not only about cross-border mergers, but also local integration," he added.
(Reporting by Sergio Goncalves, editing by Axel Bugge and Alexandra Hudson)
