Consolidation in the European Financial Industry

In recent years the European financial system has been characterized by large scale, deep, irreversible changes in its structure, due to deregulation and concentration processes. The growing competitive pressures have forced financial intermediaries to rethink strategic and organizational choices in order to achieve better performance. Globalization and the financial crisis emphasize the problems caused by worldwide banking structures and require a reassessment of groups’ development strategies.Given the importance and centrality of the consolidation processes for the European financial industry , the goals of this book are:- to analyze the concentration process in the European financial system and its implications for the strategic evolution of the banking industry, the corporate governance of intermediaries and regulation and financial supervision ;- to investigate the consolidation processes both in the banking industry and in the financial markets (Stock Exchange industry);- to focus on cross-border concentration processes in the European context.This book is the outcome of research undertaken by three groups of academics, from the Universities of Modena and Reggio Emilia, Udine and Verona, as part of a National Research Project (PRIN) financed by the Universities themselves and the Italian Ministry of Education, entitled ‘Financial intermediaries cross-border and cross-sector concentration processes in Europe: regulatory, strategic and management issues and value creation’.The central theme is the general process of consolidation, and the M&A operations in particular, widespread in the financial sector since the early Nineties of the last century, and responsible for a radical transformation of the structural characteristics of the banking and financial systems in both Europe and the United States. The main drivers of this process have been the liberalisation and integration of the European market and, in more general terms, the IT revolution and the globalisation of financial markets worldwide.The subject of consolidation in the financial sector, focus of attention for large numbers of academics and operators in many countries over a considerable time, has recently acquired even greater significance in the aftermath of the financial crisis. For a long time, favourable macroeconomic conditions meant that the positive aspects of these processes were most in evidence, especially the new availability of financial services to the mass market, the expansion of the range of services benefiting more or less all categories of clientele and, probably, a tendency to an increase in the efficiency of both markets and systems. However, the resulting formation of very large banking and financial groups, operating at the cross-border level and subject only to constraints and controls which all proved to be more or less ineffectual and inefficient, generated huge concentrations of risks and levels of correlation responsible for the spread of the recent financial crisis across almost the entire globe. On the one hand, the crisis revealed the obstacles to the success of banks’ M&A-based growth strategies, while on the other it highlighted the pitfalls of the creation of very large, complex groups, certainly capable of achieving synergies and competitive advantages, but also generating negative effects with regard to operating efficiency, groups’ governance and control, and the rationality of the structures themselves. Banking consolidation processes, and the body of M&A operations through which they have taken place, are thus being reviewed today in the light of utterly new facts and processes, which on the operational level have led to the largest mobilisation of public resources ever seen, and on the intellectual scene are cata