John Gormley (Dublin South East, Green Party)
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Question 123: To ask the Minister for Finance his views on Commissioner McCreevy's plans for increasing cross-Border consolidation in financial services; and if he will make a statement on the matter. [32943/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I assume the Deputy is referring to the Commission's study into possible obstacles to cross-Border mergers and acquisitions in the financial sector, which arises from a discussion at the informal meeting of EU Economic and Finance Ministers in September 2004.

I might first clarify that the Commission has no role in promoting increased cross-Border consolidation as such, as that is a matter for the market. The purpose of the study is simply to identify if any unfair barriers exist that would obstruct cross-Border mergers. That said, the Commission has pointed out that in a truly integrated EU market, cross-Border mergers and acquisitions must be one of the options open to financial institutions. However, it equally acknowledges that financial integration can be achieved in other ways. For example, any EU licensed bank can sell its products throughout the EU through branches in other member states, supervised by its home supervisory authorities, and a number of European banks are active in the Irish market on this basis. Alternatively, they can set up or acquire subsidiaries in the other member states which are supervised by the host supervisory authorities in those member states.

A key issue in the cross-Border consolidation context is a provision in the codified banking directive which allows banking supervisors to block a bank takeover on prudential grounds. The financial services industry feels this provision can be abused by some member states to prevent incoming cross-Border takeovers in particular, thus acting as a barrier to cross-Border consolidation. The Commission is developing proposals, in consultation with the member states, to tighten up the prudential criteria on which a takeover approach will be assessed and also to make them more transparent.

On 8 November ECOFIN was briefed by Commissioner McCreevy on actions to improve the regulatory framework for cross-Border mergers and acquisitions in the financial services industry and the Presidency reported broad consensus for the continuation of the Commission's work.

I might also note that Ireland has proven itself to be open to cross-Border consolidation, and there have been six foreign takeovers of Irish-based banks in recent years. As the Deputy will be aware, Ireland has a small domestic banking market, and these foreign market entrants can do much to improve competition.