Should European Banking Really Be More Like US Banking?

European bank mergers and acquisitions are back! Or, well, a bit of chat about the possibility is anyway. It’s easy to be carried away: Top banking regulators are hungry for the efficiency, profitability and better service that pan-European banks could deliver.

Last week, Deutsche Bank AG Chief Executive Officer Christian Sewing told a Bloomberg conference that he wants to lead European consolidation, though he also listed the many hurdles to clear before deals can be done. BNP Paribas SA of France, meanwhile, has been dropping hints to the Dutch government that it might be willing to take ABN Amro off its hands, Bloomberg News revealed a few days earlier.

Big deals have been absent so long that authorities might cheer the limpest of pairings over the line. In eagerness see something happen, we’re in danger of forgetting to ask why, or whether such deals are even a good idea. Creating European champions would be good for the banks, for their ability to compete with US peers and potentially good for Europe’s economy overall. But they could make things worse for some countries or regions by exacerbating economic downturns.