What are National Champion Banks?

Where did the notion of a national champion bank come from?

The concept of banks as national champions is not new, but it has taken on a new significance since the 2008 global financial crisis (GFC). In the European Union, national championship have gained a more nuanced significance as pan-European banking regionalism and the notion of regional banking champions have emerged as key outcomes of the EU’s Banking Union and the broader European integration.

How did the 2008 global financial crisis influence the idea of banking globalisation?

The GFC signalled the end of the then prevailing phase of banking globalisation, which had seen a number of US and European banks throughout the 1990s and 2000s develop full-service global strategies that were focused on scale and were increasingly location, currency, client and product-agnostic. The post-GFC era tore apart the idea that the world needed dozens of global banking behemoths, even to serve the needs of a fully-globalised interconnected financial services industry.

How did the post-2008 bank bailouts lead to the emergence of national champion banks?

Multi-billion dollar bank rescues and bank support schemes by multiple national governments led to a regulatory regime that while global was driven by an inward-looking defensive notion of ‘Too Big to Fail’ and an imperative to end national taxpayer-funded bailouts.

A natural consequence of having national taxpayers as shareholders-by-proxy in bailed-out or government-assisted banks throughout the US and Europe, plus concomitant pressure by governments on banks to adapt business strategies, was the emergence of simplified ‘return to basics’ home-country-biased business models and a return to the fore of the concept of having large banks act as national champions i.e. banks serving the needs of domestic governments, companies and consumers.

What is the purpose of a national champion bank?

The strategic end-game of national champion banks is not to achieve global domination per se but to support the needs of their home countries’ consumers and small and medium-sized enterprises, and to provide global banking services to a core set of multinational and large company clients operating out of their home bases.

National politicians, regulators and supervisors support the idea of domestic banking consolidation to:

• Improve domestic banking efficiencies
• Create a better balance between banking capacity and domestic need
• Drive up returns