Uni­Credit-Com­merzbank Deal is Test Case for ECB

What seemed unthink­able days ago is hap­pen­ing: a major Euro­zone bank plans to acquire another in a dif­fer­ent mem­ber state. Uni­Credit, Italy’s second lender, says it holds con­tin­gent deriv­at­ive instru­ments which would give it effect­ive con­trol of Com­merzbank, the second-biggest bank in Ger­many by mar­ket cap­it­al­isa­tion (“The trouble with Uni­Credit’s interest in Com­merzbank”, Opin­ion, Septem­ber 30).

The two banks are a good match. After years of dra­conian clean-up and restruc­tur­ing, Uni­Credit recently out­per­formed most European peers by net returns and mar­ket valu­ation. Now worth twice what Com­merzbank is worth, it is an inter­na­tion­ally diver­si­fied group, exper­i­enced in restruc­tur­ing itself and other banks. It already owns an import­ant mort­gage unit in Ger­many, which would gen­er­ate syn­er­gies. Com­merzbank, by con­trast, with a cost ratio well above Uni­Credit’s and profits about a tenth of the size, may bene­fit from some internal cure. Both banks have sound cap­ital and liquid­ity pos­i­tions.

In its recent report on European com­pet­it­ive­ness, Mario Draghi called for bank­ing integ­ra­tion in the Euro­zone, even sug­gest­ing spe­cial legis­la­tion is needed to bring it about. This deal would mark a remark­able step in the right dir­ec­tion.

But within Ger­many, it is fiercely opposed by the polit­ical estab­lish­ment and trade uni­ons, fear­ing loss of con­trol and job cuts.

At the time of writ­ing, the only obstacle seems to be author­isa­tion by the European Cent­ral Bank, on pruden­tial grounds. Its super­vis­ory board, chaired by former Bundes­bank vice-pres­id­ent Claudia Buch, includes top offi­cials from the Bundes­bank and BaFin, Ger­many’s fin­an­cial watch­dog. All of them are bound by stat­ute to act inde­pend­ently in the sole interest of the EU bloc and not take instruc­tions from gov­ern­ments or any other bod­ies.

The Uni­Credit-Com­merzbank deal is a test case for the ECB, which will rever­ber­ate into the future, and be a golden oppor­tun­ity for its super­vis­ory board to uphold its inde­pend­ence.

This letter by IEP@BU fellow Ignazio Angeloni was originally published in the Financial Times 

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.

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