European Capital Markets with a Single Currency

By Jean Dermine; Pierre Hillion | Go to book overview
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Table 1.19. International mergers in Europea
Buyer Target
Deutsche Bank Morgan Grenfell
ING Bank Barings
Swiss Bank Corp Warburg, O'Connor, Brinson, Dillon Read
Dresdner Kleinwort Benson
ABN-AMRO Hoare Govett
UNIBANK ABB Aos
FORTIS Mees Pearson
Merrill Lynch Smith New Court ( UK)
FG ( Spain)
Crédit Suisse BZW (equity part)
a Not complete, for illustration only.
start to trade financial services over the telephone or Internet, then the importance of the branch network will disappear and, very likely, a large size will also be required to establish a strong national or European brandname. As cross-border restructuring becomes necessary, a second issue will arise. Should this international restructuring occur along specific lines of business, such as fund management, corporate and investment banking, or should it take the form of a large diversified international universal bank?33
7. Conclusions
The objective of this chapter has been to identify the various ways through which a single currency would alter the sources of competitive advantage of European financial firms. Our analysis has identified various markets which will be significantly affected. Besides the obvious fall in revenue from intra-European currencies trading, the analysis has led to nine main conclusions.
1. The structure of national government bond markets and their fast-expanding appendices, the interest rate derivative markets, will change fundamentally. The fragmented national markets will be replaced by a European consolidated market. This is due to the fact that two main sources of competitive advantage for domestic banks which have been identified in the literature, namely access to home-base investors and expertise in national monetary policy, will vanish. Moreover, many of the national interest rate derivative instruments which have been created in recent years win disappear, being replaced by a few euro-based instruments.
2. An analysis of the corporate bond and equity markets suggests significant but less fundamental changes. In these currently fragmented markets, three main sources of competitive advantage are client relationships, assessment of credit risk, and currency
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33
See the complete discussions on strategic positioning by Walter and Smith in Chs. 9 and 10.

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