In
a world where global walls have virtually broken down
in a financial sector which is characterized for the
most part by full capital convertibility with money
flowing across international borders with ease, where
domestic mergers and acquisitions have been spiraling
worldwide for the past two decades, cross-border mergers
between banks in Europe have been quite a rarity, comparatively.
Our special focus here is Europe, because it is in Europe,
particularly, where the financial sector is more fragmented
and heterogeneous than in the US, that there have been
longstanding expectations of consolidation. Since the
European Union (EU) is a conglomeration of smaller countries
and is geographical structure-wise very different from
the US which is made up of a large number of states,
it was expected that the EU would witness a slew of
cross-border mergers. But cross-border mergers here
have, at best, been sporadic.
So, when in one of the largest deals of the decade,
Abbey National, the sixth largest bank in the UKpre
mergercomplied with a ¤12.5 bn takeover bid from
Banco Santander, the biggest Spanish Bank in 2004, industry
watchers wagered that the deal would be a precursor
to a spate of pan-European mergers, and the single currency
unification of the EU would be further strengthened
by the consolidation of the banking sector there. Then,
there were the fine-tuned Basel-II norms on capital
adequacy to conform to. The refined guidelines no longer
adopted a `one size fits all' approach to risk, but
had broadened the scope of its prudential norms by not
only distinguishing between various levels of corporate
credit risk, but including market risk and operational
risk also. This would undoubtedly boost the capital
requirements of many banks, urging them to merge. |
