Excerpt
February 28, 2025, Opinion: "The ECB has an opportunity to build a sound banking sector. The unprecedented spree of merger proposals roiling Italian banks lately raises three questions: why is it happening, and why now? Are those proposals good or bad? And what should authorities and investors – the first being asked to approve them, the second to finance them – do? The future of the Italian banking sector, until recently among the continent’s weakest, may well depend on those questions being given the right answers. Like Tolstoy’s unhappy families, those proposals all differ from one another. First, Unicredit’s approach to Commerzbank is the boldest: it would create a unique and innovative cross-border bridge between Italy’s and Germany’s traditionally conservative banking environments. Unicredit is two times larger by market capitalisation and more profitable. It already owns a mortgage unit in Germany and close to 10% of Commerzbank itself. European Central Bank supervision must authorise the Italian lender rise to 28%, which would open up various possible combinations. The main obstacle to the deal is the fierce opposition of the German political establishment. Whether this opposition will survive the election outcome, which is expected to lead to a new Christian Democratic Union/Christian Social Union-led coalition, remains to be seen."