In its clearest sign of support for further consolidation of the European banking sector, the European Central Bank (ECB) has published supervisory guidelines on how it will evaluate mergers and acquisitions. The draft guidelines clarify that merging entities may not necessarily be asked for additional regulatory capital. It also sets out the ECB’s supervisory expectations as to merging entities’ use of their own risk models during an implementation period as well as the permitted degree and use of “badwill”. The public consultation period runs to October 1, 2020.
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