Developments that shaped the European banking industry

According to data from The Banker’s Top 1000 World Banks in 2008, Italy has the most profitable and Germany the weakest banking sector among the big five European economies (France, Germany, Italy, Spain and Britain). Spanish banks have been the most successful in expanding their presence internationally, while Italian banks such as UniCredit and France’s Société Générale have been strategically increasing their presence within Europe itself.

Some of the main factors shaping the European banking industry are listed below.

• Integration
  
  The creation of a single economic and monetary market in Europe has long been the objective of policy makers. There has been considerable progress in this arena, starting from the creation of the European Union (EU) and the Euro. The EU comprises 27 member states, 15 of which comprise the Eurozone where the Euro is the sole currency. With almost 500 million citizens, the EU generates an estimated 30% share of the world’s nominal GDP. Apart from this, much has been achieved in the creation of a single market for the financial services industry. Work is ongoing towards the SEPA (Single Euro Payments Area) initiative that is set to make EU-wide payment transactions as convenient and efficient as those at a national level. Major steps have been taken towards the implementation of the Financial Services Action Plan (FSAP), especially in creating a single market in wholesale financial services with implementation of the Markets in Financial Instruments Directive (MiFID) from November 2007. The retail banking segment however remains fragmented along national borders.