Bank Mergers in a Deregulated Environment

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Bank Mergers in a Deregulated Environment Promise and Peril

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Bernard Shull, Gerald A. Hanweck

Book Code: Q379

ISBN: 1-56720-379-5

ISBN-13: 978-1-56720-379-0

DOI:

232 pages, figures, tables

Quorum Books

Publication: 2/28/2001

List Price: $119.95 (UK Sterling Price: £70.00)

Availability: Print on demand

Media Type: Hardcover

Trim Size: 6 1/8 x 9 1/4

Subjects:

Reviews:

...offer a practical proposal for new legislative action that would enhance the benefits of bank mergers without exacerbating the weaknesses.
—Business Horizons September-October 2002
I think the Shull-Hanweck book deserves careful attention from policy makers and policy analysts. I highly recommend the book to anyone interested in bank competition issues and antitrust policy toward bank mergers. It is a reasoned and refreshing antidote to the pervasive deregulation mantra and blind adherence tp fre-market theory devoid of market imperfections that are prevalent in real-world markets.
—The Antitrust Bulletin Summer/Fall 2002

Description: Deregulation in banking and finance may hold promise for consumers, but what actually seems to be developing is trouble. Large banks are combining into small clusters of mega-banks with national and global reach, supported by government safety nets premised on fears they are "too big to be allowed to fail." One result, among several, is that retail banking suffers. Shull and Hanweck evaluate existing bank merger policy and offer workable proposals for new legislative actions that would enhance the benefits of bank mergers without exacerbating the weaknesses. They review the historical role of governments in protecting banks from competition, then the modern policy that promotes competition, and present a model to explain and highlight the problems that today's policies are causing. In the end they turn to their own research and conclude that while a special bank merger policy is still warranted, it needs to be adapted in ways that would rein in the trend toward bigness and soften the impact this has domestically and internationally. A far reaching study essential for executives in all corners of the banking and financial services industry, academic and government researchers, and teachers of business, finance, and public policy. Many argue that deregulation and technological change have so intensified competition among banks that bank mega-mergers should cause little concern. Shull and Hanweck conclude, however, that a special bank merger policy is still warranted but it needs to be adapted to the way things are today, mainly, the impact that larger banks are having domestically and on the international scene as well. They provide a history of how governments in the U.S. and elsewhere sought to suppress bank competition; then, the unique procompetitive policies that developed in the second half of the Twentieth Century, including the introduction of antitrust standards and deregulation. From their theoretical and empirical evidence they show that the newly combined banks are "competitively suspect." From other evidence they find that pricing of retail banking services in local markets does not reflect the improvements that deregulation and rapid technological change have led us to expect. They also describe how current bank merger policy, implemented by the Federal Reserve, other Federal banking agencies and the Justice Department, facilitates the growth of large banks and augments the new structural configuration. Can these problems be solved? Shull and Hanweck believe they can be and propose detailed, workable changes in public policy to do so.

Table of Contents:

Introduction
Banking and Government in the Early Days of Banking
Early Competition Policies in the United States
Banking and Antitrust
Why Banks Merge
The Economics of Structural Reorganization
Toward A New Competition Policy for Banking
Summary and Conclusions

LC Card Number: 00-042557

LCC Class: HQ1722

Dewey Class: 332


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