EU Commissioner for the Internal Market and Services Charlie McCreevy will warn today that lending growth is leaving a growing number of banks exposed to a property bubble.
Reflecting a clear difference of emphasis with Commissioner for Competition Neelie Kroes, Mr McCreevy's speech - a copy of which has been seen by The Irish Times - will defend the right of strong firms to engage in merger activity.
The speech will argue instead for greater vigilance on the part of banks in particular in relation to the financing of private equity deals, but repeat Mr McCreevy's traditional opposition to increased financial regulation.
"Financiers are faced with the almost irresistible temptation to follow competitors - old and new - up along a rapidly rising risk curve, in pursuit of holding market share and in response to shareholder pressure for ever rising returns," the speech says.
It also suggests that major corporate defaults should be welcomed as a necessary mechanism in correcting over investment "when a few significant accidents happen - that markets will adjust, amateurs will get driven out, and sound and sensible banking principles will be restored".
Bankers will not be able to trade themselves out of mounting levels of debt if the prolonged period of credit expansion comes to an end, it warns.
In spite of this warning, Mr McCreevy is expected to repeat his opposition to increased regulation.
"I have no intention whatever of trying to change the nappies of either banking supervisors, the financial institutions that they supervise, or of the professional investors who invest in them."
The Internal Market Commissioner will also announce new steps to prevent member state governments or supervisors blocking cross border mergers and acquisitions.
"Of course I fully and enthusiastically support my colleague Neelie Kroes, the Competition Commissioner, in the vigorous action she has been taking to enforce Europe's competition laws and to ensure that abuses are penalised and stopped.
"But if a company is abiding by the competition rules and at the same time is building strong market leadership - be it in air flights, in software, or in groceries - it must be because ordinary consumers are voting with their feet."
The value of merger and acquisition (M&A) activity in the Irish market soared by 75 per cent last year to reach €8.4 billion, Ed Lucas of MergerMarket will announce today at the same "Deal Drivers - Ireland" M&A conference to be addressed by Mr McCreevy. Mr Lucas expects that the value of Irish M&A deals could rise by up to 40 per cent this year to €12 billion.
