Brussels could be setting the stage for a new wave of consolidation in the European financial services industry. By demanding that banking groups which were granted state aid during the crisis shed assets on competition grounds, the European Union risks fuelling a merger and acquisition revival in the financial sector that may not be in the best public interest.

The break-up of ING, announced this week, is likely to have a domino effect on the sector and get a lot of banks and insurers thinking hard about their next moves. The insurance business, which the Dutch financial group is putting on the block, is bound to interest all the main big European insurance players such as Zurich Financial, AXA, Allianz and Generali.