Many European countries still have too many banks

WHEN CAIXABANK and Bankia, its state-owned peer, announced on September 3rd that they were exploring a merger to create Spain’s biggest domestic lender, politicians, regulators and analysts offered unusually unanimous applause. If the deal goes through, it will boost consolidation within the Spanish market, hitherto highly fragmented beneath two international giants, Banco Santander and BBVA. It may also inspire similar deals elsewhere in the European Union.

If European banks want to catch up with American and Chinese ones, they must push for consolidation. Outside the EU, that logic might also explain why the two giants of Swiss banking, Credit Suisse and UBS, are reportedly discussing a merger. The idea has been explored in the past but abandoned because of antitrust worries.