Do Depositors Benefit from Bank Mergers? An Examination of the UK Deposit Market

Abstract

This study examines whether depositors benefit from bank mergers Specifically, do horizontal retail bank mergers influence the availability and interest rates of deposit services? This examination is important, as the effect of mergers on customers is a primary merger assessment criterion in the European Union and the United States. The research question is addressed by considering 57 UK banking mergers over the period 1989–2008. It is reported that different deposit services and deposits of different values face statistically insignificant levels of interest-rate change after mergers. The availability of notice deposit services for low and high levels of investment are reduced after mergers and are largely unchanged for other deposit services. It is concluded that UK depositors benefit little from bank mergers, and different types of depositor face differences in the availability of deposit services after mergers.

Key Words:

• Retail Banking
• Mergers

JEL classification:

• G21

Notes

1. I would like to thank the ESRC for financial support for this project and MoneyFacts PLC for the use of their extensive data sets of product information. Further, I would like to thank two anonymous referees, Barbara Casu, Bruce Lyons; participants of seminars at the universities of East Anglia, Essex, Newcastle, and Swansea; the ESRC Seminar in Accounting Finance and Economics at the Royal Society of Arts (September 2007); the British Accounting Association (2008); and the 6^th Infiniti International Finance Conference, Trinity College, Dublin (2008) for their helpful comments in the development of this work. All errors remain the responsibility of the author.

2. Before the UK Enterprise Act (2002), the criterion was the public interest. A discussion of the EU merger control regime is provided by Röller et al. (2000).

3. The EU distinctly considers mergers that create or increase a dominant firm position, which subsequently impedes competition. Summaries of the efficiency pass-through criteria in other international jurisdictions are provided by Bian and McFetridge (2000), Renckens (2007), and Sanderson (1997).