Continental banks move to Anglo-Saxon model

Source: Financial Regulator
Reviewed: 13-Sep-06

European banking will increasingly move towards the Anglo-Saxon model prevalent in the UK, emphasising profitablility and becoming more focused on shareholders than stakeholders.

The UK's banking industry is almost exclusively shareholder value-oriented, says the author David Llewellyn, with no state banks and a relatively small mutual banking sector. In practice, this has meant substantial cost-cutting, one of the lowest branch penetrations in Europe and capital repayments to shareholders.

It has long delivered a much higher return on equity than banks in Europe, where state and cooperative ownership is of varying importance.

Factors driving this continental convergence towards a shareholder value model include the globalisation of competition, the developing Euro capital market, takeovers, privatisation, banking liberalisation and increasing shareholder activism.

For European business that will mean an ongoing loosening of traditionally strong bank/corporate relationships and more capital market-based corporate financing.

Is a new European banking landscape emerging?
David Llewellyn,
Financial Regulator, Vol 11 No 1, June 2006

Review by Steve Lodge