Consolidation of the Banking Industry and the Merger Guidelines

Recently there has been considerable speculation about the prospect for a major consolidation of the banking industry via mergers and acquisitions. Some question has arisen as to whether the antitrust laws might be an impediment to the consolidation of banking. This question is examined using a mechanical simulation of all horizontal bank mergers that would be acceptable with the strict application of the US Department of Justice's numerical merger guidelines. The results indicate that, under the current guidelines, mergers could occur to the point that the largest number of banking organizations in any single market in the US would be 6 and the average number per market would be 3. In those merger proposals that exceed the numerical structural guidelines, the regulators generally conduct a more complete analysis and may do so in proposals that do not exceed the guidelines but involve highly concentrated markets. Considering the factors taken into account, even more mergers would be theoretically possible under the merger guidelines.