Tavares, who was testifying to parliament's budget and finance committee, said that he had been pondering the question of concentration in the sector for some years and that various studies show that "there are no economies of scale" in banking.

While banks do need "a minimum scale to be profitable", from that level upwards there are in fact "diseconomies of scale", that is to say that over-large banks lose profitability.

"The larger the banks, the more risks they incur, they are more difficult to supervise and without compensating in efficiency," Tavares said, adding that he knew of no study that indicates otherwise.

Nevertheless, he said, a study showed that 37 banks that existed in the US in 1996 gave rise to just four.

Portuguese banks and European Union banks in general have been undergoing a process of concentration, and there is talk of by policy-makers of a need to accelerate the process, on the grounds that fewer operators with more market power will make it easier for banks to face up to low profitability and a more demanding regulatory environment.