Year:    1970

Author:    Holbik, Karel

Credit and Capital Markets – Kredit und Kapital, Vol. 3 (1970), Iss. 2 : pp. 149–171

Abstract

Mergers in the American Banking Business Problems and Trends Starting from the increasing number of bank mergers in the past 15 years, the first chapter of this monograph gives a survey of the latest developments in the pertinent legislation of the United States. In particular, the Bank Merger Act of 1960 was intended to exercise control over mergers and provide uniform criteria for the authorities’ decisions on merger applications. "The act was amended in 1966 when divergent opinions occurred among the authorities in the socalled Philadelphia case. Banking must be ranked somewhere between the controlled and non-controlled sectors of the economy. The second chapter goes a little more thoroughly into the economic and social objectives. Bankers and authorities support the view that the banks compete with other institutions over almost the intirerange of their business activities, but this opinion is not uncontested. Incidentally, some authors feel that competition could be intensified by amending the regulations and standards applied by the authorities. For example, they are of the opinion that mergers restrain competition. On the other hand, the establishment of bank branches should be liberalized in the USA. The arguments advanced from various quarters against such measures to intensify competition from the standpoint of control of business and central bank policy are dealt with in detail and refuted. However, essential differences in banking competition, as compared with other business undertakings, are the criteria of financial standing and solvency. Proceeding from the consideration that the concentration within a market is usually a measure of the degree of competition, the study examines whether competition, financial standing and solvency conflict with each other as social objectives for the banking business. Empirical studies based on statistical series of interst rates for debit and credit balances have not produced uniform results. But there is much to support the view that credit mobility, which depends inter alia on the balancing of liquid resources, is better in langer institutions. Studies of costs and benefits show slight advantages for a branch banking system. This thesis is substantiated in the third chapter. In a branch banking system the conflict of social objectives is the least serious. Merger policy should be judged from this standpoint.