Europeans See Some Obstacles To U.S. Deals

A long-anticipated wave of trans-Atlantic mergers is getting under way, but a host of cultural differences could slow the pace of change, leading world bankers said Monday.

The banking systems of Europe and the United States differ greatly in regulations, technology, and customer expectations, bankers said in a closed-door session of the International Monetary Conference, which opened here Sunday.

Recounting their remarks at a press briefing, panelists said banking is nevertheless entering a new era.

Rolf E. Breuer, chairman of Deutsche Bank, citing the closing Friday of his company's acquisition of Bankers Trust Corp., said, "This is the first meaningful presence in this country of a European financial institution. I expect more to follow."

But as banking companies become truly global, weaknesses in regulatory coordination are growing more apparent, panelists said.

Frankfurt-based Deutsche Bank, for instance, reports to more than 70 agencies worldwide, Mr. Breuer said. "Over time, we can do without this number of uncoordinated regulatory agencies."

A regulator on the panel-Howard John Davies, chairman of Britain's Financial Services Authority-said such concerns are well-placed. His agency, which supervises both banks and securities firms, was held up as an example of the type of regulatory system bankers are pushing for.

Mr. Davies said that efforts to coordinate banking, securities, and insurance regulation internationally are making progress but have been hampered by the lack of "consolidated supervision of major investment houses" in a few key countries, notably the United States.

Bankers, for their part, said they expect gradual change. Mr. Breuer predicted that "Euroland"-the 11 countries that have adopted the euro as their currency-will have a common financial regulatory system in five years.

Meanwhile, bankers are grappling with the impact of technology on delivery of financcial services and with customers' entrenched preferences.

The Internet is likely to change the business model, said John S. Reed, co-chairman of Citigroup Inc., and it will reward companies with a well- defined brand.

In the past month alone, the chairmen of Bank One Corp. and First Union Corp. have publicly emphasized their regard for the Internet as a key to consumer banking growth.

But Mr. Reed, though embracing the promise of Internet delivery, said certain fundamentals will apply whether distribution is through brick-and- mortar sites or electronic means.

"In the Internet world, the key competitive factors have to do with the number of customers you have, the knowledge you have of them, and probably your brand," said Mr. Reed, who in 1996 predicted that it would take as long as two generations for the world to fully evolve to electronic banking.

Asked whether nonfinancial companies like Microsoft Corp. pose a threat, Mr. Reed said not yet. "People are always worried about it, but there's no competition between them and us," he said. (Citigroup is a co-owner with Microsoft of the bill payment processing venture Transpoint.)

Mr. Breuer and another German banker on the panel said Europeans are resistant to some U.S.-style banking practices.

Martin Kohlhaussen, chairman of Commerzbank, said the European bank customer "has to get used to paying for services."

Added Mr. Breuer: The U.S. "consumer market is more developed in terms of using technology-based distribution." Their European counterparts "love their old branches. They want it all."

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