European Banks Gird for Change : In 1992, Barriers Will Fall Throughout Common Market

European banks are mapping new strategies--and defenses--for major changes due in 1992.

That year, when the European Community is set to end all trade barriers among its 12 member states, any bank may open branches and offer services from Skagen in the north of Denmark to Algeciras on the southern tip of Spain.

“After 1992, European banking will resemble the United States. We will have about 10 money-center banks and an array of small, regional banks, super banks and tiny specialist houses,” said a senior analyst at a major Dutch bank.

Signs of the changes are already apparent. Amro of the Netherlands is forging links with Belgium’s Generale de Banque. Spain is actively pushing mergers among its banks, and in Denmark the stock market is filled with rumors of mergers aimed at preventing an invasion of foreign banks when 1992 arrives.

Generally, bankers are skeptical of how real the impact of the changes would be. Even the architects of the unified internal market have set aspects of national banking--from currencies to accounting standards--which will have to vary from country to country, at least for awhile.

But most are convinced that whatever happens, competition will become more cut-throat than under the present snug but familiar controls.

“1992 . . . is the symbol of a financial revolution in which very regulated, very compartmentalized and very limited professions are going to find themselves very free,” said Jean-Francois Petit, general manager of French Banque Indosuez.

Some Are Concerned

Some banks are not just concerned with competition, they want to become European banks and are already embarking on mergers and takeovers.

West Germany’s biggest bank, Deutsche Bank AG, has already made a small move, buying Italy’s Banca d’America e d’Italia in 1986. One banker from a smaller European country shuddered at the thought of what would happen when Deutsche Bank decided to become “Europa Bank AG.”

But that’s not such a far-fetched idea. The fourth-biggest West German bank, Commerzbank AG, took a 10% stake in Spain’s Banco Hispano Americano and plans to take a 10% stake in Credit Lyonnais once the expected privatization of the French bank goes ahead.

The Netherlands’ third-largest bank, Amro, teamed up with Belgium’s largest, Generale de Banque. The two have agreed to take a stake of about 10% in each other and aim to come together under a joint Dutch holding company.

Some countries are actively urging their banks to reorganize ahead of 1992.

Spain’s Finance Minister Carlos Solchaga has called for mergers among the country’s top banks because without that, “Spanish banks will have an extraordinarily hard time surviving.”

Danish Banking Assn. director Karsten Hillestroem said: “We can look forward to even more intensified competition. If we do not adapt the Danish banking market to this situation, there might be a risk that business customers will be taken over by foreign banks.”

Equal Treatment

In Britain, however, insularity seems to be breaking down only slowly. “We (Britons) still have a fortress mentality which has to go,” said Philip Young, a senior executive in charge of the “1992 Policy Unit” at National Westminster Bank PLC, Britain’s biggest commercial bank.

“The notion of 1992 is coming out of the corporate planning area and featuring more in the chief executive office,” said Rod Barrett, financial research director at London brokers Hoare Govett.

A unified market requires equal treatment in each EC member state, and a few regulatory hurdles still have to be taken.

French Finance Minister Edouard Balladur has allowed domestic and foreign financial institutions to take stakes in French brokerage firms, and foreign banks have rushed in to do so.

Italy’s stock market regulatory panel Consob plans similar measures to tear down securities brokers’ trading monopoly.

Dutch Finance Minister Onno Ruding has liberalized the financial markets by allowing foreign-owned banks to be the lead manager on Dutch guilder bond issues, and foreign banks are now threatening the traditionally cozy Dutch banking climate.

But critics say it takes more than just abolishing national regulations to create a unified European financial market.

They say it requires EC regulations and a banking supervisory body to ensure that every bank plays by the same rules and that those rules apply in every member state.