Consolidation in European banking sector set to accelerate, ECB says

The process of consolidation in Europe's banking sector "may well accelerate in the near future," the European Central Bank said, adding that it felt "cautiously optimistic" with regard to
the outlook for the EU banking industry in the coming months. The results of its annual survey of the banking industry "seem to point towards the potential for further consolidation, which may well accelerate in the near future", the ECB said.

"This may take the form of domestic M and A (merger and acquisition) activity among banks and cross-sectoral consolidation, for example, between banks and insurance companies or securities firms," the guardian of the euro wrote.

The importance of cross-border mergers was likely to increase in future, but for the time being, the perceived benefits of such cross-border tie-ups and the potential synergies were lower.

The survey of 103 banks carried out by the ECB showed that the priority for the institutions in the short term would be to do their homework and boost profitability, the head of the ECB's banking supervisory committee, Edgar Meister, told a news conference.

The ECB also said it felt "cautiously optimistic" with regard to the outlook for European banks in the coming months "on condition that the upturn seen in the first half of 2004 continues in the coming quarters."