Bank Mergers Are Systemically Important: A Review of Bank Markets and The Merger Review Process

I analyze several aspects of recent changes in the banking industry, some of which correspond to the financial crisis in 2008 and the government’s subsequent financial reforms. The banking industry was greatly impacted by the crisis, including the types of banks that persist. Specifically, I analyze: the decreasing number of community banks, the tends of increasing banking assets and deposits, the consolidation within the banking industry, and distributional implications related to bank size. I discuss the antitrust motivations for reviewing mergers and how bank merger reviews combine traditional priorities of protecting competition with additional priorities to provide financial stability and services within a community. The outcomes and review processes corresponding to bank mergers are therefore different from those corresponding to mergers in non-banking sectors.

By Robert C. MacKay^[1]

I. INTRODUCTION

The enforcement of antitrust policy intends to protect competition and avoid related inefficient market outcomes, which include customers paying higher prices, reduced market output, decreased product quality, or diminished incentives for producers to innovate. Mergers that are suspect of violating antitrust laws might include those that: (1) lessen competition or tend to create a monopoly;^[2] (2) constitute a contract or conspiracy in restraint of trade;^[3] or (3) constitute an unfair method of competition.^[4] The Department of Justice (“DOJ”) and the Fe