Another round of consolidation in the Iberian financial
sector is expected in 2017. And, if only in terms of the
semi-announced and widely discounted merger between Bankia and
Banco Mare Nostrum (BMN), this new round does indeed seem
likely. More broadly, the present map of institutions, with
roughly 15 substantial financial groups (though with remarkable
differences in size) is commonly acknowledged as an
intermediate stage in the route towards a landscape that will
be dominated probably by fewer than 10 groups.
There is every likelihood that market consensus will turn
out to be right. However, there are also reasons to believe
that the consolidation process may be slower than expected.
In this sector, the Iberian market tends to be
self-contained. No new actors are expected and, as a matter of
fact, some international players seem willing to leave the
peninsula, rather than play any part in the consolidation game.
In this situation, the number of institutions able to take part
in the process as consolidators (the largest Spanish banks) is
Given that potential consolidators are already substantially
exposed to the domestic market (more so than they would
probably desire), the only reasonable driver behind
consolidation is the seeking of synergies. And, again, the
number of institutions – in terms of those to be
consolidated – that offer synergy potential for the
big players is limited. Furthermore, synergies are fine as long
as they do not result in extra costs.
In this situation, the right path is not obvious.
Then there is regulation. Though size (coupled with
efficiency) seems to be the only answer to the question of how
to make a bank viable in the zero or less-than-zero-interest
rate world, with size also comes an increase in regulatory
pressure. Larger institutions have to cope with capital buffers
and other continuing regulatory requirements that smaller
players are spared. On the other hand, although size does not
necessarily mean complexity, it can become more of an issue
from the resolvability perspective, and can trigger further
requirements, in this case coming from the newly established
Never easy, banking consolidation and the M&A activity
attached to it have become increasingly demanding in recent
times. Market players might be wise to take it slowly.