Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston
The merger of Fleet and BankBoston in September 1999 resulted in a regional New England lending market in which only one large, universal bank remained. We explore the extent to which that merger resulted in monopoly rents for the combined entity in some niches within the regional loan market. For small- and medium-sized middle-market borrowers, prior to the merger, Fleet and BankBoston charged unusually low loan interest rates, reflecting their ability to realize economies of scope and scale. After the merger, those cost savings were no longer passed on to medium-sized middle-market borrowers, which resulted in an increase in the average interest rate credit spreads to those borrowers of roughly one percent. Small-sized middle-market borrowers (which continued to enjoy the advantage of loan market competition from remaining small banks) maintained their low spreads. Our results suggest that it may be desirable for regulators to consider the concentration in lending markets in addition to deposit markets when evaluating mergers and structuring appropriate divestiture requirements.
|Date of creation:||May 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Flannery, Mark J., 1984.
"The social costs of unit banking restrictions,"
Journal of Monetary Economics,
Elsevier, vol. 13(2), pages 237-249, March.
- Mark J. Flannery, . "The Social Costs of Unit Banking Restrictions," Rodney L. White Center for Financial Research Working Papers 15-82, Wharton School Rodney L. White Center for Financial Research.
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
- Degryse, H.A. & Ongena, S., 2002. "Distance and competition," Other publications TiSEM 96f9f961-889a-40e3-ac3e-7, School of Economics and Management.
- Beim, D-O, 1996. "The Prime Premium : Is Relationship Banking Too Costly for Some?," Papers 96-22, Columbia - Graduate School of Business.
- Nicola Cetorelli, 2002. "Entry and competition in highly concentrated banking markets," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 18-27.
- repec:dgr:kubcen:200216 is not listed on IDEAS
- Hans Degryse & Steven Ongena, 2005.
"Distance, Lending Relationships, and Competition,"
Journal of Finance,
American Finance Association, vol. 60(1), pages 231-266, 02.
- Degryse, H.A. & Ongena, S., 2002. "Distance, Lending Relationships and Competition," Discussion Paper 2002-16, Tilburg University, Center for Economic Research.
- Degryse, H.A. & Ongena, S., 2003. "Distance, Lending Relationships, and Competition," Discussion Paper 2003-123, Tilburg University, Center for Economic Research.
- Hans Degryse & Steven Ongena, 2002. "Distance, Lending Relationships, and Competition," CSEF Working Papers 80, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Jith Jayaratne & Philip E. Strahan, 1996. "Entry restrictions, industry evolution and dynamic efficiency: evidence from commercial banking," Research Paper 9630, Federal Reserve Bank of New York.
- Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- repec:ner:tilbur:urn:nbn:nl:ui:12-92221 is not listed on IDEAS
- R. Glenn Hubbard & Darius Palia, 1994.
"Executive Pay and Performance: Evidence from the U.S. Banking Industry,"
NBER Working Papers
4704, National Bureau of Economic Research, Inc.
- Hubbard, R. Glenn & Palia, Darius, 1995. "Executive pay and performance Evidence from the U.S. banking industry," Journal of Financial Economics, Elsevier, vol. 39(1), pages 105-130, September.
- Douglas D. Evanoff & Diana L. Fortier, 1987. "Reevaluation of the structure-conduct-performance paradigm in banking," Staff Memoranda 87-9, Federal Reserve Bank of Chicago.
- Petersen, Mitchell A & Rajan, Raghuram G, 1995.
"The Effect of Credit Market Competition on Lending Relationships,"
The Quarterly Journal of Economics,
MIT Press, vol. 110(2), pages 407-43, May.
- Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
- Nicola Cetorelli, 2001. "Competition among banks: good or bad?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 38-48.
- David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11351. 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: ()
If references are entirely missing, you can add them using this form.