By contrast, the “market power” effect tends to prevail over the efficiency effect where the merging banks both have a large presence in the same market. These findings confirm the continued importance of the physical closeness of customers to their banks and the need for the attention that the competition authorities pay to local markets.
Mergers inevitably impact the payment system and the stability of the banking sector. By diminishing the number of participants in the payment system, they tend to reduce the volume of transactions to be settled. The setting of operational and technological standards aimed at exploiting network economies may well be easier.