Europe bank bosses yearn for M&A as U.S. dealmaking expected to take off

European banking leaders are hoping for further deal-making activity on the continent as mergers and acquisitions in the U.S. are expected to pick up under the new Trump administration.

Steven van Rijswijk, chief executive of ING, the largest bank in the Netherlands, said there are too many banks in Europe, adding to the inefficiencies of the European Union’s financial system.

“I think there are too many banks in Europe for an efficient capital system,” he told CNBC at the World Economic Forum in Davos, Switzerland.  

His comments come amid speculation over whether UniCredit, the sixth-largest bank in Europe by market cap, will be permitted to merge with Commerzbank, Germany’s second-largest bank.

The Italian lender holds a stake in the German bank through a proxy and is currently awaiting approval to increase its stake from the European Central Bank. If allowed, it be one of the largest cross-border deals in European banking for years, but it has run into political headwinds.

CEOs have hit out regulators in the European Union over what they perceive to be over-regulation at a time of heightened global competition. Many fear the United States will pave the way for its companies globally by lowering barriers, while the European Union instills even more rules.

The ING bank CEO also suggested that fragmented laws across Europe were hampering a more efficient banking system, in stark contrast to the United States.

“We see also in Europe that there are different regulations on different elements,” van Rijswijk said. “Talking about anti-money laundering, GDPR or cyber there are differences in Europe that hamper [the] efficient way of banks doing business with our customers.”

“Consolidation, also because of the compartmentalization of regulation, I believe will largely happen within individual markets,” he added.

However, Sergio Ermotti, chief executive of Swiss bank UBS, which operates a large wealth management division in the United States, suggested that while U.S. authorities are unlikely to water down rules for large banks, the policy stance taken by regulators under the new Trump administration is likely to see deal making revive among several small and regional banks.

“What will be allowed, probably is consolidation in the U.S. first of all, among second-tier banks. Rationalizing a little bit of that aspect. And that, in turn, will create opportunities,” Ermotti told CNBC at Davos.

“I don’t believe that we’re going to see a lot of deregulation,” added Ermotti, who’s leading UBS through its forced takeover of competitor Credit Suisse. But he said he does expect a “rationalization” of existing regulation instead.

José Viñals, chair of Standard Chartered, said he’s hopeful of “thoughtful” deregulation in Europe rather than a watering down of rules for the sake of it.

“I think that some thoughtful deregulation might also be good, for example, for other parts of the world. I’m thinking of the European Union,” Vinals told CNBC. StanChart is a London-listed bank but derives most of its profits from Asia.

“This is something which is going to be positive for growth. But those policies, we know are difficult to implement, but they’re not impossible,” he added.

Similarly, Adena Friedman, chief executive of Nasdaq, said Europe is unlikely to see the benefits of a Capital Markets Union — a unified regulatory framework for capital, like the United States — unless smaller regulators concede powers to a pan-European regulatory agency.

“There are layers and layers of regulation” in Europe, Friedman told CNBC’s live audience at Davos.

Europe has to decide “what elements of society and community have to be regulated by a national regulator, and what elements need to be regulated by a regional regulator,” the Nasdaq boss said. Aside from New York, the company operates stock exchanges in Sweden, Denmark, Finland and Iceland.

“You’ve got national regulation and regional regulation. That has got to change,” she said. “It’s very solvable, it’s just the matter of the will.”