UBS chairman slams EU impasse over banking union
THE failure of the European Union (EU) to complete its banking union is putting the continent’s lenders at a strong disadvantage, said UBS Group chairman Colm Kelleher on Wednesday (Jan 18).
“Europe is massively losing out competitively to the US banking system,” he said during a panel session at the World Economic Forum in Davos, Switzerland. He said this was because the region could not break down national barriers to banking, adding that it “needs a markets-based banking system”.
Kelleher’s comments underscored the importance that many bank executives have attached to the EU’s effort to allow more banking services across the entire bloc under a so-called banking union. Many said this has been slow to materialise, hindering much-needed mergers and acquisitions in the fragmented European banking sector.
The banking union, they said, would make it less costly for them to operate in the region while creating a bigger market, hence leading to economies of scale.
Executives including Deutsche Bank chief executive Christian Sewing said the banking union would also facilitate cross-border takeovers. A lack of scale compared with US rivals is among the structural problems faced by many European banks.
Kelleher said that UBS has a “global strategy”, and that the Swiss bank has not been impeded by regulations put in place after the 2008 financial crisis.
The EU has repeatedly tried and failed to complete the banking union since publishing a road map for it a decade ago. The latest attempt foundered last year.
The creation of a joint deposit insurance has long been the main obstacle. Countries such as Germany fear that this would create a risk-sharing structure that could put their taxpayers on the hook if banks in other countries were to go bust. Then again, some large failures, including that of Greensill bank two years ago, happened recently in Germany. BLOOMBERG
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