A wave of consolidation among Europe’s banks in the aftermath of the financial crisis could end up creating banks that are considered too big to fail, the Dutch central bank warned in a report yesterday.

The central bank called for limits on the size of banks and warned against the “tempting” idea that European Central Bank supervision meant giant banks no longer posed systemic risks.

“The balance sheet of BNP Paribas, the largest in the banking union, is worth about 15 per cent of the eurozone’s GDP (and about 30 times the size of the European banking resolution fund),” the report said.

Outlining its vision for the future of Dutch banking, the central bank said Europe’s banking union and comprehensive asset review had eliminated many of the uncertainties that had hindered consolidation.

“Greater transparency and banks’ capital strengthening have made both attracting capital for takeovers and the valuation of takeover candidates easier,” said the bank, known by its Dutch acronym DNB.

The volume of banking mergers and acquisitions in Europe plummeted from more than €140 billion in 2007 to less than €30 billion in 2012, according to the DNB. But recently, market talk of imminent banking consolidation has increased.

ING, the Netherlands’ largest bank, is once again free under the terms of its state bailout to make acquisitions, after its stake in former insurance subsidiary NN Group fell below 50 per cent last month. The bank says it has no immediate plans.

Another former Dutch banking giant, state-owned ABN Amro, is preparing to go public again with an initial public offering in Amsterdam valued at around €15 billion.

But the Dutch central bank said the experience of the US showed that dealing with giant banks was not simple. It noted that the US Federal Deposit Insurance Committee had concluded the resolution plans – how they will be wound down if they fail – of the 11 largest US banks were not credible.

Dutch banking would benefit from more foreign participants, the DNB said. The Dutch banking market is the fifth most concentrated in Europe, and the top five banks hold more than 80 per cent of the sector’s total assets.

“In a crisis of domestic origin, foreign banks’ services can be more stable, for example if they can lean on capital and liquidity support from their parent company,” the DNB said.