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PARIS, France — Creating large banks that can operate across Europe is desirable for sustaining the continent's financial system, the European Central Bank's chief economist said Friday.
"Having a banking system that is too localised and, in turn, too intertwined with its domestic sovereign, is not a good recipe," Philip Lane told a conference organised by French investment bank Natixis in Paris.
"From a macroeconmic point of view, it's very important to have the risk sharing that comes from cross-border banking. That can be in terms of equity ownership, it can be in terms of funding, it can be in terms of common technology," Lane added.
He was speaking as Italy's second-largest bank, UniCredit, targets a hostile takeover of German rival Commerzbank, having launched a bid in May that expired on Tuesday. The Italians longer-term aim is to merge Commerzbank with Germany's HypoVereinsbank, owned by UniCredit.
The Milan-based bank made a bid valued at 35 billion euros ($40.6 billion) not just to take control of a rival in a fellow EU state but to cement its status as a European heavyweight.
Lane said if banks are unable to achieve mergers, they must seek other ways to reduce costs and risks in a period of rising fixed expenditure, amid the growing need for expensive cybersecurity systems.
Lane said he foresaw a relatively small number of giant banks in Europe and noted the arrival of purely digital banking players to the market, disrupting traditional banking models.
Established players must respond to this process by offering competitive products, embracing technological change along the way, he said.
