The ECB wants the banking system to be less nationally-focused...
Moody's has cut the debt rating for Deutsche Bank, leaving its unsecured senior debt just two levels above junk status.
It is the second time this year that the credit rating agency has downgraded Deutsche.
Deutsche's unsecured senior debt was moved from Baa1 to Baa2, whilst its long-term deposit rating dropped a notch from A2 to A3.
The latest cuts are due to concerns over "increased challenges" to the German financial institution successfully implementing its turnaround plan.
Deutsche outlined its five-year plan to boost profits and capital position, and leave the poor returns and expensive legal charges of recent days behind last October. This included letting go of 9,000 employees and exiting 10 countries, as well as cutting other costs and offloading assets.
Moody's said a reversal of Deutsche's fortunes and a "stable" rating was possible once "substantial progress" was made on the plan.
In the short term, it called Deutsche's recent quarterly performances "weak"; it made a €6.8bn loss in 2015.
The bank's CEO, John Cryan told Bloomberg at an Institute of International Finance’s conference in Madrid.
"We have enough capital to repay all of our debt four-times over".
The Deutsche disappointment comes on a week in which the European Central Bank is suggesting that Europe needs to reduce its number of banks.
The ECB's Financial Stability Review found that splitting financial institutions along national lines and the excess capacity in some markets hurts performance and profitability.
Action could be taken to encourage lenders into mergers and takeover across borders to create a situation where a small number of very big banks could capitalise on the potential of all markets.
The report would appear to pour cold water on Minister for Finance Michael Noonan's hopes that foreign banks will enter the Irish market, forcing mortgage lenders to lower their interest rates.
According to the ECB:
"Banking union, including single supervision and resolution mechanisms, in principle provides ideal conditions for banks to capitalise on new cross-border merger and acquisition opportunities.
"However, progress in both domestic and, in particular, cross-border bank consolidation remains limited to date.
"In fact, EU banks' merger and acquisition activity has significantly slowed since 2007, in terms of both the number and the value of transactions".