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ECB's Nouy expects more M&A in banking sector

The European banking sector will likely see an increase in M&A activity given the eurozone's economic growth recovery and regulators' increasing efforts to tackle banks' nonperforming loans, according to ECB Supervisory Board Chair Danièle Nouy.

In an interview with Portuguese newspaper Público, Nouy explained that weak economic growth and uncertainty regarding the quality of the balance sheets of banks that can be purchased is one of the reasons why there are few mergers in the euro area.

"But I think that with growth returning and with the huge amount of work that is being done in relation to nonperforming loans, we are going to see a number of mergers taking place within countries and across borders," she said.

Nouy also addressed criticism that the ECB's proposed guidelines for addressing banks' future bad loans would go beyond the regulator's mandate.

"We would be exceeding our mandate if we were trying to apply general rules to all of the banks, which is not the case," Nouy said, while stressing that the ECB's NPL plan would be implemented "on a case-by-case and a bank-by-bank basis."

Nouy added that it is very likely that implementation of the ECB's NPL plan will be postponed by a few months as its review could take a month or two, but that there is no reason for it to be further delayed until 2019.

The plan, which will force banks across the eurozone to set aside more cash to cover newly soured credit, was also met with opposition by Italian banks and politicians who fear that the ECB would also adopt new measures in relation to banks' existing NPL stocks, which stand at more than €300 billion in Italy.

"We are planning to publish something on the quantitative expectations regarding legacy stocks at the end of the first quarter next year," Nouy said.