Rumors Circulating about UniCredit and SocGen Merger

The FT and Bloomberg are reporting that Italian lender UniCredit is said to be exploring a merger with the third biggest bank in France, SocGen. After an initial spike higher, shares of UniCredit traded flat on the news.

As counterparts risks across the European financial system rise, M&A deals are starting to do the rounds. Last year, a prospective merger between UniCredit and Commerzbank didn’t yield a final deal.

The rumours circulating in the media state that the French CEO of UniCredit, Jean Pierre Mustier is discussing a merger with SocGen, a bank where he worked earlier in his career.

SocGen Board Denies Discussions Took Place

The board of directors of SocGen denied that the deal has reached a stage which merited a discussion in an official statement.

The big unknown here is whether the discussions took place before or after the formation of the new Italian government between populist and nationalist formations in the local parliament. The recent implosion in bond spreads between Italy and Germany signifies market worries about the sustainability path of the Italian financial system.

As counterparts risks are rising, so does the likelihood that Italian banks will need to pay significantly higher interest rates on bonds when compared to the rest of Europe.

Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term Risks Keep Rising

The imbalances within the European financial system are a positive development for brokers. At a time when the crucial new ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term regulatory framework is set to get implemented, retail brokers are valuing every bit of higher volatility and market turmoil.

Trading volumes across the industry since the start of this year have been booming. The market is in sharp contrast to the latter parts of 2017, which has increased margins for brokers during the first half of the year.

This, in turn, has given them a sign of relief before the new ESMA regulatory framework kicks in. As the interbank lending spreads are widening, brokers will also need to look at their counterparty risks.