Outdated regulations, politics, and outmoded ownership structures are preventing banks in Europe from consolidating and achieving needed economies of scale, according to senior industry executives gathered here.

"There are still far too many constraints, state controls, and excess political interference restricting sound management in Europe," said Keith Brown, a managing director for Morgan Stanley Dean Witter & Co. in London. "Europe is taking a long time to catch up."

Speaking at the annual meeting of the European Financial Marketing Association, executives noted that no European bank operates in all 15 countries of the European Union.

"Business in Europe has built a basis for a broad European market," Mr. Brown said. "But American firms are much more aware of the benefits of the euro than European companies."

He and other conference participants said European banks are increasingly in danger of being taken over by U.S. financial services companies or of losing out to more nimble competitors, such as insurers, supermarket chains, and technology companies that are entering the financial services business.

New entrants in financial services, such as J. Sainsbury and Tesco PLC, two large grocery chains in the United Kingdom, are now attracting a significant percentage of retail deposits in Europe, Mr. Brown said.

"There is a growing risk our companies will fall into the hands of foreigners more interested in short-term earnings than long-term strategies," said one French banker.

Financial industry officials at the conference pointed to the large number of government-owned and mutual banks in Europe as a major obstacle to achieving the kind of consolidation that has boosted efficiencies and profits in the U.S. banking sector. They added that protectionism makes genuine cross-border banking in Europe a distant prospect.

Members of the European Union, which adopted a single currency in January, are hampered by "a lack of political harmony, structural and cultural discrepancies," and fiscal policies serving national rather than European interests, said Franz Wenzel, an investment manager at Axa, the French financial conglomerate.

Executives said the rapid globalization of financial markets, worldwide deregulation of financial services, growing international fund flows, financial innovation, and an explosion in technology mean that European banks have less time than they think to restructure and remain competitive.

They said consolidation has been far slower in the retail banking sector than in corporate and investment banking.

"The next decade will see the creation of 10 major financial services groups in Europe," Mr. Brown said. "The challenge for banks is to maintain their products and distribution at competitive prices."

He also said only three banking companies-Citigroup Inc., HSBC Holdings PLC of London, and ING Group of Amsterdam-have been able to carve out cross-border market positions in a range of financial products.

He and others warned that insurance companies, rather than banks, may wind up dominating the European retail financial marketplace.

"Insurance companies will be very big players in the consolidation process," Mr. Brown said.

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