IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Financial industry megamergers and policy challenges

  • Thomas M. Hoenig
Registered author(s):

    In the past few years, the pace of consolidation in the banking industry has accelerated, and combinations between banks and other financial service providers have become increasingly prevalent. In some countries, consolidation has resulted from the need to eliminate weak or problem institutions. More generally, however, the unprecedented wave of merger activity in financial services is being driven by powerful changes in telecommunications and information technology and by the removal of legal and regulatory barriers to national and international linkages. An important recent development is a change in the scale of financial industry mergers. Indeed, the size of these business combinations has increased to the point that, both in the United States and Europe, "megamergers" are reshaping the structure of the financial services industry.> Financial megamergers raise a number of important public policy issues. Some of these issues are very familiar and apply equally to megamergers and to more traditional mergers between financial service providers. For example, regulatory approval of megamergers may depend on antitrust implications and industry concentration.> However, the rise of banking and financial industry conglomerates brings into sharper focus a long-standing concern not addressed in existing merger guidelines. In a world dominated by mega financial institutions, governments could be reluctant to close those that become troubled for fear of systemic effects on the financial system. To the extent these institutions become "too big to fail," and where uninsured depositors and other creditors are protected by implicit government guarantees, the consequences can be quite serious. Indeed, the result may be a less stable and a less efficient financial system.> In a speech before the European Banking and Financial Forum in Prague, Mr. Hoenig discussed the challenges posed by financial industry megamergers and examined some possible policy options currently under study.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.kansascityfed.org/publicat/econrev/PDF/3q99hoen.pdf
    Download Restriction: no

    Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

    Volume (Year): (1999)
    Issue (Month): Q III ()
    Pages: 7-13

    as
    in new window

    Handle: RePEc:fip:fedker:y:1999:i:qiii:p:7-13:n:v.84no.3
    Contact details of provider: Postal: One Memorial Drive, Kansas City, MO 64198
    Phone: (816) 881-2254
    Web page: http://www.kansascityfed.org

    More information through EDIRC

    Order Information: Email:


    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:fip:fedker:y:1999:i:qiii:p:7-13:n:v.84no.3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LDayrit)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.