The announcement on March 20th that Banco Sabadell, Spain's fifth-biggest lender, would spend £1.7 billion ($2.5 billion) buying tsb, a "challenger" to Britain's four main high-street banks, marks the biggest cross-border banking acquisition in the European Union since the financial crisis. It follows a bid of €1.1 billion ($1.2 billion) in February by fellow Spaniard Caixa Bank for the 56% it does not already own of bpi, a Portuguese bank. Is this the start of a long-awaited wave of intra-European deals, after a long post-crisis chill in deal-making (see chart on next page)? Alas, no. For starters, Sabadell's purchase is deliberately outside the European core. Sabadell's chairman, Josep Oliu, says his goal is to diversify away from Spain, and tsb would increase the group's assets abroad from 5% to 22% of the total. He likes the British market, where the authorities are keen on welcoming new entrants, growth is healthier and regulation is stable. Second, a genuine single market is one in which banks are able to move capital and liquidity around freely. Regulators are still not keen on that idea. Sabadell has no plans to shift capital across borders. It thinks it can cut costs, especially in it, and pump more business through tsb's underused branches; any excess capital will, for the moment, stay in Britain.
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