Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston / Charles W. Calomiris, Thanavut Pornrojnangkool.

Format:

Book

Author/Creator:

Calomiris, Charles W.

Contributor:

National Bureau of Economic Research.

Pornrojnangkool, Thanavut.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11351.

NBER working paper series no. w11351

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

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.

Notes:

Print version record

May 2005.