Transparency of Regulation and Cross-Border Bank Mergers Analysis of Interest Rate Differentials across the Monetary Union

There is ample anecdotal evidence that political influence might constitute a barrier to the integration of European banking markets. Based on a data set on the transparency of the supervisory review process of bank mergers in the EU, we estimate the probability that a credit institution will be taken over as a function of bank and country characteristics and the transparency of merger control. The results indicate that a credit institution is systematically more likely to be taken over by foreign banks if the regulatory process is transparent. In particular, large banks seem to be less likely to be taken over by foreign credit institutions if merger control lacks procedural transparency.