FRANKFURT: Too many European banks survived the financial crisis, the head of Europe’s banking regulator said in a newspaper interview on Monday.
“I’m convinced that too few European banks were dismantled and disappeared from the market,” European Banking Authority (EBA) chief Andrea Enria told the daily Frankfurter Allgemeine Zeitung in an interview.
“Barely 40 [disappeared], compared with around 500 in the United States,” he said.
“Governments wanted to keep their banks alive and that has hampered the healing process” of Europe’s financial system, Enria said.
The EBA organized a series of stress tests for European banks in recent years, which have been criticized as being too lenient.
One of the two co-chief executives of Germany’s biggest lender, Deutsche Bank, added his voice to the criticism on Monday.
Speaking at a financial congress in Frankfurt, co-Chief Executive Officer Juergen Fitschen said that he regretted the apparent lack of confidence in market forces in Europe.
“In future, a bank must be allowed to go bust,” he argued, saying that the process of consolidation in the sector was proceeding only slowly.
Too many banks “aren’t progressing because they’re being kept alive without them having to make any contribution to the process of change,” Fitschen said.
Europe is currently in the process of setting up a new banking union to strengthen its financial system. And Enria told the Financial Times that he was in favor of putting in place truly Europe-wide structures.
“You need European decision mechanisms rather than having always a committee-type of decision in a crisis,” Enria said. “Committees in a crisis don’t work because you have conflicts,” he said.
And Enria added: “They give us responsibilities, but they put so many national safeguards on every task we need to do that sometimes I am concerned we will not be able to perform [them].”