In the context of the emerging scenario, a properly worked out consolidation of public sector banks can generate synergies in allocation of workforce and branches as well as streamlining of operations to meet the future challenges. The focus has to be on ushering in significant improvements in efficiency and rationalisation of scarce capital to meet the capital adequacy requirements.
Furthermore, the European Commission has set up a “high level” group headed by former Bank of France Governor Jacques de Larosière, to bring forward ideas on strengthening EU financial supervision. There are two possible outcomes. Either cooperation will intensify gradually – building forth on existing institutions such as CEBS –, or cooperation will intensify abruptly – creating a European Financial Supervisory Authority.