European banking system
The European banking system, based on the French banking legislation of 1984, promotes a universal bank, in contrast to the Anglo-Saxon concept of restricting financial activities. An open market was created throughout the community: free movement of capital, freedom to create and provide services. In addition, the single European market is widely open to the outside world.
Status and trends
The European banking system is undergoing a process of cost reduction and mergers. But over the past two years, banks, which accumulate a quarter of the market value of European banks, have been involved in various types of mergers. In each European state, concentration was supported by state bodies. Which gradually reduced their role (privatization of Spain, permission to enter minority capital into French nationalized companies). Also one of the features of banks in Europe is their small size (see Note 1 ).
In fact, the ten largest European banks have retained the national dimension. Mergers and acquisitions are growing, but banks in Europe seem to focus on concentration between boundaries and scatter beyond borders (see Note 2 ).
The 1990 alliance in the Netherlands between two competitors is also impressive: Allgemeine Bank Nederland (ABN) and Amsterdam-Rotterdam Bank (AMRO). The new division, ABN-AMRO Bank, is the sixth European bank and nineteenth in the world, with assets of 232.7 billion US dollars and 1,850 branches in 52 countries. To strengthen its position, the bank acquired the Chicago Stock Exchange Bank and Frankfurter Credit Bank in 1991 and acquired the European-American Bank of New York.
Mergers and acquisitions will appear in Europe on a larger scale, which will lead to increased profitability. The introduction of the euro will act in this regard, will make prices for banking products more transparent and will cancel other sources of income that are received from foreign currency and the creation of deposits in different currencies. The euro will help increase the transparency of the capital market. Companies can easily compare the price of credit in the market. This will increase market liquidity, which will help reduce credit. The risk of fluctuations in various European currencies will be eliminated.
Despite this reinforcement, national differences persist. The structure and income inequality remain heterogeneous, as are preferences: the British and Germans are more predictable, and in southern countries a liquid economy attracts more. These differences can become real barriers to entry into national territories, which, despite the deregulation, will protect their companies.
However, analysis by income or social and professional categories and by age, will highlight, in addition to national specifics, fundamental financial preferences, explained by age and income; that is, relatively more homogeneous transnational segments. But such a vision of macro segments is probably the source of the introduction of Japanese banks in Europe. In 1990, 60 of them operated in Europe (London, Lisbon, Milan, Paris, Barcelona). But only a few banks can boast such results as the British bank Lloyds TSB, which has received a 30% profit rate over the past five years; With a cost/income ratio of 45%, this bank is one of the most efficient banks in the world at the moment. He has a quarter of warehouses in England. In Europe, on average, there are twice as many banking agencies/residents as in the United States.
- “There are too many medium-sized banks and few giants in Europe. Also trends show that half of them will disappear or unite to rationalize the domestic market.
- For example, the strategy in Societe Generale is defined as follows. “The offer of banking services, which should be considered only in the national territory” … “and a simple study of anchor points abroad”.