There are small, medium-sized and large banks. Each of them must find its niche in a competitive environment and face significant challenges. Size can help to overcome them.
From an international perspective, in Europe we have medium-sized banks. In some cases, as in Spain, we have banks with an international presence. But at the continental level, we cannot speak of large banks with a broad European presence. The strict capital adequacy and resolution regulation to which European banks are subject encourages an increase in their size. The paradox arises when considering that we do not have a genuine banking union, nor have we made sufficient progress towards an integrated capital markets market. The prospects for consolidation in the sector at European level are therefore limited in the short term.
The size of banks helps them improve profitability. One example is the sector’s digital transformation that customers are demanding. In a context of intense competition such as today’s, with new operators benefiting from a certain regulatory imbalance compared with banks, it is essential to make short-term investments at a high cost of capital. Economies of scale can be a critical factor.
Many of the constraints on banks are related to structural aspects of the European economies to which they belong. Regulators should promote the sector’s profitability. As a society, we need stable, sustainable and profitable banks. The necessary digitalisation of banking activity must be implemented with a balance between the enormous benefits customers gain, strengthening their protection and ensuring cybersecurity, fair competition (same activity, same rules) and rules that foster innovation.
