Regulatory black hole puts banks off deals

Fri Dec 21, 2012 7:29am EST
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* Banks in Europe shrinking to meet tough capital rules

* Regulatory uncertainty puts banks off snapping up bargains

* Private equity and hedge funds stepping in to buy

* Investors fear Basel III will not be the final word

By Carmel Crimmins and Steve Slater

DUBLIN/LONDON, Dec 21 (Reuters) - Regulatory uncertainty is putting large banks off buying the assets of smaller rivals, complicating the sector's restructuring and giving hedge funds and private equity a golden opportunity to swoop in.

Banks are facing a regulatory crackdown in the wake of the financial crisis, with national regulators increasingly opting to go it alone with stricter rules, creating confusion for lenders trying to calculate the merits of buying a rival's assets and for fund managers running the slide rule over bank stocks.

"The regulatory environment is such that you are seeing increasing capital standards for banks, but we don't know yet where they are going to," said Niall Gallagher, manager of the GAM Star Continental Europe Equity fund.

"There's a lot of investor angst out there at the moment, and unless you have a crystal clear view, it is very hard to invest in these stocks."   Continued...