Rumors Of European Bank Mergers: A Dangerous Pipe Dream

A new trend seems to be alluring banks, especially the ones failing or suspected of failing: mergers. Now, why would two failing banks want to merge? To get bigger, of course, and then become “too big to fail”! To ensure more support from the State, or States, if the newly-formed group is transnational, and to get unconditional aid from the European Central Bank. At that point, one is in a direct systemic crisis, but with such support of unfathomably deep pockets, the specter of bankruptcy fades away. 

There are notably rumors about Commerzbank merging with Deutsche Bank or with the French bank BNP Paribas and, also, about the Italian bank UniCredit and Société Générale, the French bank. Both German banks are under pressure and their stock prices are sinking. Merging would actually prove that they can’t escape their fate and they would de facto be protected by the State… on the way to become nationalized. A merger between BNP Paribas and Commerzbank would be more political than anything else. One can already hear the governments and the media hyping the “Banks Airbus”, which would be grotesque. And as far as an eventual merger between UniCredit and Société Générale happening, it would be the joke of the decade, since the current CEO of the Italian bank, Jean-Pierre Mustier, was Jérôme Kerviel’s immediate superior when he almost put Société Générale under… he hadn’t been able to notice the extravagant positions of one of his traders, and now he would wish to be at the top again! 

What is worse than the rumors is what seems to be an official encouragement from one of the highest-ranking banking authorities in Europe, namely Danièle Nouy, the president of the European Banks Supervision Committee. On November 7, 2017, she stated: “We definitely need more… cross-border consolidations, in particular. I would like to see mergers within 12 months. I’m an optimistic person.”