Bank Merger Wave: The Economic Causes and Social Consequences of Financial Consolidation

FROM THE PUBLISHER

For the past fifteen years, the U.S. banking industry has experienced an unrelenting and unprecedented merger wave that has resulted in the disappearance of about half of all banks in operation at the end of the 1970s. While the argument is made that consolidation will allow banks to compete more effectively with nonbank and overseas competitors, two key questions remain: is consolidation a good thing for customers and will it enhance efficiency in banking? In this far-reaching study, Gary Dymski shows that operating efficiencies are not what is driving bank merger mania. Evidence suggests moreover that bank mergers and consolidation may have effects that are contrary to consumer and non-financial business interests. Lower rates of interest paid on deposits, increasing fees (despite gains in computer technology), a decline in the volume of business loans, tighter credit constraints, increasing denial gaps between upper- and lower-income, minority and white (non-Hispanic) applicants are all demonstrable outcomes of consolidation. Evaluating data collected from a selection of cities across the United States, Dymski recommends several new policies to apply to the evaluation of prospective mergers.

FROM THE CRITICS

Booknews