Where now for European banks?
Now that the dust surrounding the introduction of euro notes and coin has settled, a true European single market is beginning to emerge. Although there are still significant legal and regulatory differences between the European Union member states, banks are increasingly aware of the challenge they face to remain competitive over the next few years.
Examples of successful banking consolidation can be seen at all levels. At the national level, we have seen the mergers of NatWest and Royal Bank of Scotland in the UK, BNP and Paribas in France and Banco Santander and BCH in Spain. The creation of both Fortis and Nordea has produced strong regional banks in Benelux and the Nordic countries respectively. Internationally, the merger of JP Morgan and Chase Manhattan Bank has created a new banking colossus.
We have written before of the need for companies to monitor developments in the European banking sector. There will continue to be significant changes and further consolidation at all levels is inevitable - as banking strategies succeed and fail.
Technology will also play its part in this process. New entrants will compete with banks for parts of their business. In some cases, those new entrants will see their first mover advantage eroded as the banks catch up with the technology. In other areas, the new entrants will be able to carve out a sustainable niche, notwithstanding the banks' efforts. The independent treasury management system market is a good example of this.
But these technological improvements will act as a catalyst to the real changes, the evolution of the banking sector. As Darwin wrote, 'only the fittest will survive'.