M&As in the financial industry: A matter of concern for bank supervisors?
| DOI | https://doi.org/10.1108/eb025077 |
| Pages | 225-236 |
| Published date | 01 March 2001 |
| Date | 01 March 2001 |
| Author | Michael Wolgast |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 9 Number 3
M&As
in the
financial industry:
A
matter
of
concern
for
bank supervisors?
Michael Wolgast
Received: 23rd April,
2001
Leiter der Abteilung Volkswirtschaft, Gersamtverband
der
Deutschen Versicherungswirtschaft,
Friedrichstr. 191, 10117 Berlin, Germany; tel: +49 (30) 2020 5130; fax: +49 (30) 2020 6606;
e-mail: m.wolgast@gdv.org
Dr Michael Wolgast worked
as
senior
economist
at
Deutsche Bank Research
in
Frankfurt. Since 1st July 2001,
he has
been
chief economist
and
head
of the
econom-
ics department
at the
German Insurance
Association (Gesamtverband
der
Deut-
schen Versicherungswirtschaft (GDV),)
in
Berlin. Before taking
up his
current
posi-
tion,
he
worked
as an
economist
for the
Federal Ministry
of
Economic Affairs
in
Bonn
and for the
German Savings Banks'
Association.
Michael Wolgast graduated with
a maî-
trise d'économie appliquée from
Paris-IX-
Dauphine
and
with
a
Masters degree
in
Economics from
the
London School
of
Eco-
nomics
and
Political Science.
He
took
his
doctorate
at
Kiel University.
This paper
was
essentially written
in
April 2001, while
the
author
was
still
work-
ing
for
Deutsche Bank.
ABSTRACT
Merger and
acquisition
activity among financial
firms worldwide
has
increased sharply.
The
implications
of
this
activity for bank supervisors
are the focus
of
this paper. Topics covered are
the 'success'
of
mergers, risk management,
financial system stability and market liquidity.
Merger
and
acquisition
(M&A)
activity
among financial firms worldwide
has
increased sharply
in
recent years
(see
Fig-
ures
1–3 and
Table
1),
with deals
of
unprecedented scope
and
scale grabbing
the headlines.
The
bulk
of
the M&A activ-
ity still consists
of
domestic mergers, invol-
ving firms competing
in the
same segment
of
the
financial services industry (mainly
banks).
Along with
a
sharp increase
in the
average size
of
single transactions,
the
share
of cross-border M&As
has,
however, risen
significantly
(see
Figure
4).
Also,
the
crea-
tion
of
financial conglomerates
— ie of
groups operating
in
more than
one
sector
of
the
financial industry
— is
constituting
an increasingly important part
of
overall
activity, with bancassurance, which com-
bines banking with insurance business,
as a
prominent example.1
As a
result,
a
signifi-
cant number
of
large,
and in
some cases
increasingly complex, financial institutions
has already been created,
and
both more
cross-border deals among large players
and
more transactions across
the
different sec-
tors
of
the financial industry seem
to be in
the offing. Indeed,
in
view
of
the scope
of
the changes driving financial sector consoli-
dation,
the
current extraordinary wave
in
M&A activity
can be
expected
not to
come
to
an end
before
a
substantial further
restructuring has taken place.
M&As have positive implications
for the
industry involved. They
are an
indication
that market participants
are
responding
and
adapting
to
pressures
for
change such
as
globalisation
and
deregulation
of
markets,
the advent
of new
technologies
and
pro-
duct innovations
and
increased shareholder
pressure
for
strong financial performance.
Journal
of
Financial Regulation
and Compliance, Vol. 9, No.
3,
2001,
pp. 225-236
© Henry Stewart Publications,
1358-1988
Page 225
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