What is banking risk? And why do we come back to talk about it cyclically? Does it pose risks for account holders and bank employees?
But above all: since there are companies and money at stake, wouldn’t it be better to call it a “banking monopoly?”. Let’s try to answer all these questions.
What is banking risk
The term “banking risk” is not an official term: it is more of a journalistic simplification that indicates a phase of mergers, acquisitions, takeovers, takeover offers (Opa) or exchange offers (Ops) between banks and financial groups.
The image evoked is that of the famous board game Risk!, in which players “fight” by moving troops around the map to compete for territories, alliances and positions of power. It is not known exactly who coined the expression relating to banking risk, since it has been used for decades in print media, on television news and on the web.
The board game used as a model for these operations is Risk! and not Monopoly because the former more evokes tactics and direct clashes.
In the international financial press, formulas such as are used to indicate this type of movement:
- banking consolidation;
- banking M&A wave or just M&A (Mergers & Acquisitions);
- takeover battle;
- banking dealmaking;
- bank merger wave;
- banking shake-up;
- corporate raid or hostile takeover (for hostile takeovers).
The consolidation of the banking sector accelerated in the early 1990s and then accelerated from 2000 onwards. The drivers of banking risk were the internationalization of markets and the proliferation of technology. Banks have understood that to prosper they must grow, gaining national and international market shares.
The larger banks, in short, have understood that banking risk is useful for reducing operating costs and offering a wider range of services to their customers.
In general, smaller banks tend to want to resist banking risk, but this is not always the case: in the case of small entities, there can also be significant advantages. Think about the costs fortechnological innovation in this era in which hacker attacks are structural. Compliance with international standards and cybersecurity expenses can be difficult for a small bank to manage. Being part of a larger circuit also allows you to attract global customers. Banks, therefore, seek mergers and acquisitions in an attempt to make themselves competitive.
The ECB looks positively at consolidation between banks, because larger banks are considered more stable and also easier to control. But not only that: the EU is aiming for the consolidation of European banking groups, as opposed to the Chinese and American titans.
The risks of banking risk
Every coin has its downside and even banking risk is not free from critical issues.
The first to look suspiciously at mergers and acquisitions are bank employees, who fear that mergers could create overlaps in tasks, leading to layoffs.
But even for bank customers, sometimes there is no shortage of problems. An example that actually happened, without mentioning the subjects involved (who we will call “Bank A” and “Bank B”), concerns the condominium administrators. The professionals who operated with current accounts at Bank A could manage dozens of banking relationships (one for each managed condominium) by accessing home banking through a single account. A single account for dozens of condominiums. Well, after the acquisition by Bank B, this operating mode was not maintained: the administrators found themselves forced to create and manage separate credentials for each individual condominium. Result: dozens of bank accounts for dozens of condominiums.
Recent examples of banking risk
There are currently several open fronts regarding banking risk. As is known, UniCredit has set its sights on the German Commerzbank, arousing the disappointment of the Berlin Government.
But the very hot front of the banking risk is currently another: in Italy Banco Bpm has formally proposed an agreed aggregation to Banca Monte dei Paschi di Siena. The union would create the second Italian banking group. But the competition did not stand by and watch: Intesa Sanpaolo gave the green light to a voluntary totalitarian takeover bid for MPS.
Only until a few years ago, Monte dei Paschi di Siena, the oldest bank in the world, was in ruins: it was saved from bankruptcy only thanks to the direct intervention of the State. Today it grinds billions, its stock grows slowly and steadily and it is a dividend cow. It even acquired Mediobanca, thus also entering Assicurazioni Generali. Today MPS, through Mediobanca, holds 13.32% of Generali.
