Crypto News: Brussels Edition: Europe’s banking challenge

Welcome to the Brussels Edition. I’m Suzanne Lynch, Bloomberg’s Brussels bureau chief, bringing you the latest from the EU each weekday. Make sure you’re signed up.

European Union Finance Chief Maria Luis Albuquerque has rebuffed demands by Europe’s biggest banks for Brussels to split its landmark banking competitiveness proposal in two.

The background: the European Commission unveiled a long-awaited proposal to overhaul its banking sector in July. But in a letter last week the heads of eleven lenders including Santander, BNP Paribas and UBS, urged swifter action on reforming capital rules, rather than waiting for agreement on a long stalled deposit scheme. The banks are also calling for an immediate moratorium on any capital increases while the bloc advances its proposals.

Albuquerque rejected the idea that there was any “low-hanging fruit” to cut, instead telling Bloomberg Television that Europe was best served by using a single package to deliver reforms. “If we really want to do something meaningful we need to look at this as a package because everything is connected,” she told Stephen Carroll.

The Portuguese commissioner was also clear that Europe’s banking problems were about scale – not overly-onerous capital requirements that banks argue put them at a disadvantage to the US.

Big deals between lenders in different member states “should have happened a long time ago,” she said. “We do believe that being bigger, operating cross border, ultimately will benefit the clients,” she said.

While “it’s not for the commission to say whether banks should be big or small,” she said it’s important that “we have a regulatory framework which is not standing in the way of good business cases to gain scale.”

Her comments follow months of wrangling between politicians and bank executives in Germany and Italy over UniCredit’s plan to take over Commerzbank. The takeover is seen as a key test of EU banking consolidation, although lenders such as Austria’s Erste and Spain’s Santander, which struck a deal in Poland, have shown what can be done.

The Portuguese commissioner also said that a plan to streamline Europe’s market supervision is “likely” to be diluted after EU lawmakers pushed for sweeping changes.

The Latest

Swedish voters will be left in limbo for days about the shape of their future government, as counting in yesterday’s vote continues following the tightest election ever.
Monte Paschi dei Siena pledged to keep pursuing its twin offers for Banco BPM and Banca Generali even if it gets bought by Intesa Sanpaolo.
Novo Nordisk will shorten its name to just Novo in a bid to become more recognizable in its obesity market war with Eli Lilly.
The European Central Bank won’t hesitate to raise interest rates further if necessary, though it will take time to determine its next steps, according to Governing Council member Peter Kazimir.
European leaders are meeting today in Finland to discuss growing competition in the Arctic, where global warming is opening new shipping routes, governments are vying for vast natural resources and a Russian military buildup is heightening security concerns.

Seen and Heard on Bloomberg

Maria Municchi, multi asset fund manager at M&G Investments, discussed the outlook for the artificial intelligence trade after leaders of the biggest firms proposed slowing the technology’s development over the weekend. She told Bloomberg Television that while “price will continue to behave pretty well,” markets are becoming “a little bit more wary” about whether the capex boom will translate into delivered earnings.

Chart of the Day

Covered bonds issued by French banks and backed largely by mortgages now yield almost 30 basis points less than 10-year French government debt, the most extreme inversion ever, based on data compiled by Bloomberg. As recently as four months ago, the two traded at roughly the same yield. The divergence upends one of the basic assumptions of fixed income — that sovereign debt should be the safest borrowing benchmark in its home market. Instead, mounting concern over France’s budget deficit, rising debt-servicing costs and political uncertainty ahead of April’s presidential election is forcing investors to demand more to lend to the state than against pools of household mortgages.

Coming up

G-20 energy ministers meet in Houston, Texas later today
European Parliament plenary session begins in Strasbourg this evening
German Foreign Minister Johann Wadephul meets Hungarian Foreign Minister Anita Orban in Budapest today.

Final Thought

Europe’s protracted efforts to become an attractive proposition for investors reached a momentous juncture today: the arrival of a consolidated tape. The fragmentation of trading across venues is often blamed for the view that markets in Europe have lower liquidity versus the US, which introduced a country-wide tape five decades ago. Besides issues like diverging legal systems and patchy settlement infrastructure, the European Union has identified piecemeal trading data as one reason investors see the bloc as multiple different markets rather than a single unified one. The tape aims to counter that view by displaying supply and demand data for company shares and exchange-traded funds across the region.

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