Why Europe needs banking champions but gets national dwarfs
26 years ago, in March 2000, the European Council in Lisbon formulated an ambitious goal: The EU was to become the most competitive and dynamic knowledge-based economic area in the world. Today, the Global Competitiveness Index (GCI) shows an enormous race to catch up by China since 2000, which has now caught up with Europe. The USA is still in the lead. Europe has stagnated.
The stagnation of European competitiveness is not only evident in the field of artificial intelligence, where Europe currently plays almost no role at all in competition with China and the USA. It is also evident in the financial industry. This paper uses the example of the takeover of Milan-based Mediobanca by the Tuscan Banca Monte dei Paschi di Siena (BMPS) in September 2025 to show how the lack of a single European capital market promotes national consolidations and thus further weakens the competitiveness of European banks.
The European capital market would actually be particularly suitable for creating growth options and thus competitiveness through harmonization. In 1999, shortly before Lisbon, Europe overcame national egoisms in a truly bold way and introduced a common currency, the euro. Without economic competitiveness, political self-determination between the blocs of China, the USA and Russia will become increasingly difficult for Europeans. The aim of this paper is to show how the lack of European competitiveness in the banking sector leads to nation-state thinking. And thus further worsens its competitiveness.
The motivation for the takeover
On January 24, 2025, the Tuscan BMPS announced its intention to take over the then much larger Mediobanca from Milan. This announcement was remarkable in a number of ways. Firstly, Banca Monte dei Paschi di Siena (BMPS), with a capitalization of around €8 billion at the time, was much smaller than Mediobanca, which had a market value of around €13 billion. Secondly, BMPS – Italy’s oldest bank – was saved from bankruptcy by the Italian state shortly beforehand between 2017 and 2022. Thirdly, Italian Prime Minister Georgia Simoni supported the takeover with the ulterior motive that it would create an Italian champion (not a European champion) – alongside Intesa Sanpaolo and UniCredit. This is because Mediobanca has a 13 percent stake in Assicurazioni Generali, one of the largest insurance companies in Europe. If successful, this stake would belong to BMPS and could be used for consolidation within Italy. Fourthly, in 2024, the French AXA tried to gain a foothold in the Italian market by offering to take over part of BMPS’ business, which was obviously also to be prevented politically.
The takeover of Mediobanca by Banca Monte di Paschi di Siena (BMPS)
The takeover of Mediobanca by BMPS was nevertheless successfully completed in the course of September 2025. This was made possible by the issue of around 1.8 billion new shares in BMPS, of which around 1.3 billion were issued on September 17, 2025 and a further 500 million by the end of September. This multiplied the number of MBPS shares by a factor of 2.4. In total, MBPS offered 2,533 of its own new shares plus 90 cents for each Mediobanca share. BMPS is thus using 1.8 billion new shares and exchanging them for around 702 million of the 800 million Mediobanca shares. This gives it an 86.3 percent stake in Mediobanca, with the value of BMPS (including Mediobanca) rising from the original €8 billion to around €23 billion at the beginning of October. Obviously, the existing shareholders of Mediobanca were willing to exchange their shares. On the one hand because of considerable tax loss carryforwards; the website de.marketscreener.com reports a capital gain of €1.2 billion for the tendering Mediobanca shareholders. In addition, the equity story surrounding Generali presumably created share price fantasy.
Today, one year after the takeover was announced, Banca Monte di Paschi di Siena is worth around €28 billion, more than three times as much as a year ago. The value of Mediobanca has also risen by around 20%. In total, more than €10 billion in value was created. Which doesn’t sound like much. Nevertheless, the transaction is nothing more than a desperate attempt to give the European banks, which have become insignificant, a little more significance.
The Milan public prosecutor’s office is investigating
Table 1 shows the ownership structure of the three Italian financial institutions. On December 4, 2025, Handelsblatt reported on the suspicion that Delfin and Caltagirone had colluded with the CEO of BMPS, Luigi Lovaglio, to manipulate the market. This is supported by the fact that BMPS’s share price initially fell by 11 percent after January 24, 2025, while Mediobanca’s rose by 7 percent, which can certainly be interpreted as the market’s initial doubts about the announced takeover under fair conditions. In addition, both also held substantial stakes in BMPS, which they purchased from the Italian state in November 2023 and November 2024 (see www.marketscreener.com).
A new Italian champion remains internationally irrelevant
Even if the takeover was successful, market valuations remain provincially low. The US bank JP Morgan Chase has a market capitalization of around $ 800 billion, which is around 30 times more than BMPS after the bold takeover of Mediobanca. In the 1990s and 2000s, European banks were still among the global champions in terms of market capitalization. Today, the world’s most valuable banks are exclusively US and Chinese institutions. This dramatic decline in Europe’s importance is due not least to the waning enthusiasm for European unification after the end of the 1990s. European banks have far fewer business opportunities than banks in China and the USA because the market here is completely fragmented. At the same time, European regulation is much more restrictive than American regulation. US banks are therefore valued like growth companies, whereas European banks are valued like regulated utilities. In addition, a high level of equity capital through strict regulation does not protect against collapse. Credit Suisse did not fail in 2024 due to a lack of equity, but due to a loss of confidence. Takeovers of European banks by banks from China or the USA are now more likely than ever, and with them a loss of European sovereignty.
Out of concern for domestic economic supply, European governments are promoting national rather than European banking champions – understandably so. Italy is merging Monte dei Paschi and Mediobanca, Germany is blocking UniCredit at Commerzbank, to name just two examples. This may be understandable from a regional perspective, but it is detrimental to Europe’s global competitiveness.
Conclusion
Europe cannot become competitive through regulation. It needs more of the courage and boldness of the 1990s. The opportunities of the huge European market are much greater than the risks that arise from it. Our democracy is also an invaluable asset that must be defended with economic strength and not with regulations and concerns. We need more competitiveness in order to preserve the free, democratic European way of life based on the rule of law. This will also make the European financial industry relevant again. And all other industries too.