On the positive side, these developments could lead to cost saving, improved profitability to the benefit of clients and shareholders, facilitating risk diversification and contributing to economic development. On the negative side, consolidation, if taken too far, could lead to abuse of dominant market positions and moral hazard issues.
Up to now, in Europe the effect has been procyclical: notwithstanding the cheap, abundant liquidity supplied by the ECB, banks are reluctant to increase lending to the real economy. The corporate sector, especially in southern Europe, is mostly made up of SMEs, for which access to financial and capital markets is difficult, if not impossible.