Consolidation in Banking Industry – A Cross Country Experience

Aims: This Briefing Paper aims to know mergers and acquisitions activity in banking sector all over the globe.

Study Design: Cross-sectional study.

Place and Duration of Study: Selecting Countries of the World with different time period.

Methodology: The analysis has been made on the basis of regression equation and percentage with digram and figure.

Results: Number of international bank mergers has steadily increased overtime, but the percentage of bank mergers that are cross-border has been small. The percentage climbed during the late 1980s to reach a plateau around 15 percent in the early1990s. Between the mid-1990s and 2000, the share grew steadily to reach almost 30 percent in 2000. After a dip between 2001 and 2003, the percentage of cross-border mergers grew to over 35 percent in 2006. Table looks further into the regional structure of cross-border M&A in banking. It shows that Europe and the Americas experienced a significant growth in the share of cross-border bank mergers in the years 1996 to 2006 compared with to the years 1985 to1995. Asia, Africa/Middle East and Australasia, saw no significant change in the percentage of bank mergers represented by cross border transactions. While in some countries M and A activity accelerated in recent years, in some other countries, it slowed down.

Conclusion: The goal of a bank merger is to increase the bank's value in one way or another. Consolidation in banking industry is the need of the hour. A lot of companies have merged with other companies to make a mega company. Consolidation will positively amplify the business prospects of the industry in the domestic as well as international market place. “Collectiveness is strength” will hold true on consolidation in Banking Sector. The pressures on capital structure to meet prudential capital adequacy norms necessitate the need for Consolidation in the banking industry. Consolidation will provide banks the ‘size advantage’. There is a need for consolidation in the banking industry to compete for the pie in the domestic as well as global market. No doubt everyone knows the criticality of the issue and urgent requirement of mergers in banking sector, But then river also have to face various rocks, pebbles and other interruptions in its natural flow and so does Banking sector has to face various challenges for mergers.