01.27.20 - In an era of ultra-low interest rate banks are struggling to make money, who knew that knew that lower rates would mean lower margins on loans. The European Central Bank’s regulatory arm is clearing the path for mergers of a number of European banks specifically Liberbank SA and Unicaja Banco SA in Spain as well as Deutsche Bank AG and Commerzbank AG. These mergers will likely come with more cash infusions. This marks a shift away from a previously tough stance on bank mergers in Europe. Another solution would just be for the left hand to raise rates instead of having the right hand clearing red tape to offset the problems the left hand created. The average return on equity among Euro banks is roughly 6% almost half that of American banks. European banks are facing attacks on all sides, with low rates shredding their margins, and FinTech banks like N26, Revolut, and Monzo luring away consumers from their retail operations. There is skepticism among bankers on the ECB’s willingness to allow these mergers to happen and allow for these banks to become bigger as they will likely need to ease standards on capital requirements. In 2016 the ECB imposed strict conditions for the merger of two Italian banks, Banco Popolare SC and Banca Popolare di Milano Scarl. The organizations were forced to shrink their boards, make write downs of bad loans and raise €1 Billion in fresh capital. This discouraged future mergers due to what was considered an unfavorable regulatory environment.