EU Banking Sector Slumps Amid Competition Concerns

The European Union's banking sector has seen significant decline in recent years, with the market capitalization of its top banks now lower than that of JPMorgan Chase, the largest US bank. This trend is evident in a European Commission report on banking regulation published in July, which highlights the need for reforms to boost competitiveness.

The EU's banking sector has been struggling to recover from the 2008 financial crisis, with some attributing this to overly conservative prudential regulation by the European Central Bank (ECB). The ECB's approach is seen as a hindrance to bank lending, particularly to small and medium-sized enterprises that rely heavily on bank borrowing. In contrast, the US Federal Reserve has taken a more relaxed stance on capital requirements.

The EU's legacy banks have been slow to consolidate, with many local regulations standing in the way of a genuine single market. The recent merger dance involving Unicredit and Commerzbank may ultimately prove successful, but it highlights the difficulties faced by European banking consolidation. As a result, there are no pan-European banks worthy of the name, except perhaps Revolut.