M&A activity has been very weak in the euro area since the crisis – from 2008 to 2012 the overall value of deals decreased fourfold to just € billion, with cross-border deals the most affected. Nevertheless, the weak profitability and excess capacity of the European banking sector suggests that efficiency gains could be achieved.
The Herfindahl-Hischman concentration indicator for the euro area banks is at the 690 level, well below the range of 1000 to 1600 of acceptable concentration. Naturally I expect this process of restructuring to be driven first and foremost by the incentives of the private sector to raise profitability and increase returns on assets.