News
Law firms prepared for new wave of banking
mergers
Low interest rates, falling profits and
new regulatory burdens make more
consolidation in the Spanish and
Portuguese banking sectors inevitable,
but while law firms may get a short term
boost, the long term prospects are less
certain
Further consolidation in the
Spanish and Portuguese banking
sectors is set to generate a raft of
M&A, finance, restructuring and
employment-related instructions for
lawyers in Iberia. However, once
the process is complete, there are
concerns that with bigger banks
doing more legal work in-house,
there will be less work available for
law firms.
Rafael Núñez-Lagos,
Uría Menéndez
Factors such as low interest rates
mean bank mergers are highly
likely, according to Fernando
Mínguez, partner at Cuatrecasas,
Practice areas
• Arbitration
• Banking Law and Capital Markets
• Competition and EU
• Corporate and Commercial
• Corporate Compliance
• Environment
• Financial Institutions
Gonçalves Pereira. “In a sustained
environment of extremely
low rates and in view of their
overcapacity, the banking sector
needs to consolidate to become
more efficient.” Similarly, falling
bank profits and increasingly
burdensome regulation is expected
to lead to further consolidation.
Citing the fact that some Spanish
banks have yet to fully adapt to
certain regulatory requirements –
particularly new laws on savings
banks and banking foundations
– Rafael Núñez-Lagos, partner at
Uría Menéndez, believes banking
sector consolidation is inevitable
because the Spanish banking
sector “is not very profitable and
its short-term prospects are not
very good”. Meanwhile, pressure
on Spanish banks to compete at
an international level will also
force banks into mergers, argues
Fernando Navarro, partner at
Ashurst. “A growing requirement
in a global world is to have banks
that are in a position to properly
provide global services,” he
explains.
Banks of all sizes could be
involved in the consolidation
process, but mid-sized institutions
that focus on the domestic market
are the most likely candidates.
Núñez-Lagos says mid-sized
firms are expected to merge in
order to offset the problem of their
diminishing margins. “Getting
scale would be the solution for
slim margins,” he explains. “So,
• Labour and Employment
• Litigation
• Mergers and Acquisitions
• Private Law Contracts
• Public Law
• Restructuring and Insolvency
• Tax
if that’s the case, you’d expect
consolidation to involve basically
retail banks and primarily those
that are not in the top three, as
those banks are already the result
of consolidation.”
It is anticipated that mergers
will not only involve retail and
commercial banks, but investment
banks too. Navarro says
consolidation could well have an
international dimension, pointing
out that “given their size and
financial strength” some Spanish
banks have been active acquiring
banks in a number of different
countries. According to Mínguez,
while there are expectations
that consolidation will largely
be “intra-Iberian” in nature, the
possibility that foreign institutions
will look to “consolidate
significant positions in the Iberian
Peninsula should not be ruled
out”. However, Núñez-Lagos
believes it is unlikely a foreign
private equity company or bank
will take control of a Spanish
bank “simply because the Spanish
banks are too big – even the
smaller ones – and right now they
are not profitable”.
Fewer potential clients
Banking consolidation is expected
to create substantial legal work
across all practice areas. “Most
likely, it will be M&A, financial
services and regulatory work,”
says Mínguez. “Employment
may see an increase in demand
too as consolidation leads
to restructuring.” Though
consolidation will lead to fewer
clients, this does not necessarily
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• IBERIAN LAWYER • September / October 2016
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