Mergers in Financial Services

The number and size of bank mergers have recently been on the increase in many OECD countries and this seems to be related to four interactive forces: regulatory reform; globalisation in both financial and non-financial markets; excess capacity/financial distress; and technological change including the development of electronic banking. All but a very few of the mergers have proceeded without challenge under competition laws. Where there have been competition problems, competition officials have been faced with some difficult questions, especially as regards market definition, expected efficiencies, and the probable impact of electronic banking. While it is difficult to generalise, most of the competition problems that have been identified seem to relate to lending to small and medium sized enterprises. Remedies for such problems have often involved divestment of carefully selected bank branches. To achieve their goals, such divestments call for close scrutiny by competition authorities.In most countries, bank mergers are subject to oversight by both competition authorities and prudential regulators and some of these countries have adopted policy guidelines explaining how prudential regulators and competition agencies will work together in reviewing mergers. Also, some countries have adopted specific competition policy regimes for the banking sector.