Europe's bank sector may need to shrink through mergers: ECB's Nouy

Europe's bank sector has grown too big and may need to shrink, possibly through mergers or failures, Daniele Nouy, the European Central Bank's top bank supervisor said on Wednesday.

"All in all, it seems that the European banking sector might indeed have become too much of a good thing," Nouy said. "And we can see at least one of the health issues related to this - many banks in the euro area do not earn their cost of capital.

"It seems that there are too many banks competing for customers," Nouy added. "There is a good chance that the banking sector will indeed shrink"