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EU bankers expect stress tests to reignite M&A activity

Bankers within the European Union expect stress tests carried out on the leading banks in the eurozone by the European Central Bank (ECB) will reignite merger and acquisition activity across the continent.

The ECB is currently carrying out a quality review of the balance sheets of more than 120 banks in the eurozone, which is due to be completed next autumn.

Bankers speaking to Reuters at the World Economic Forum (WEF) in Davos believe the assessment will bring about greater transparency on the quality of banks' loans and other assets.

This is expected to bring an increase in merger activity within nations in the EU as weaker companies restructure and accept effective takeovers by domestic rivals, but bankers believe this will then spread to a pan-European level.

European Monetary Affairs Commissioner Olli Rehn said that banks are already preparing for the findings of the ECB's stress tests by raising capital on the market, with about $109 billion raised in the last couple of years that will be used to strengthen banks across the eurozone.

By Claire Archer