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August 10, 2007

Consumer interests sidelined in mergers

by Gill Montia

Story link: Consumer interests sidelined in mergers

According to a study undertaken by the University of East Anglia, the customers of UK banks and building societies are unlikely to see the benefits of mergers and acquisitions in the banking sector.

The University’s Centre for Competition Policy used data from Moneyfacts, the financial information service, to look at the ways in which mergers between banks and building societies improved efficiency and reduce costs.

The study examined 61 UK bank mergers occurring between 1988 and 2004. For each of these, efficiency changes were recorded for individual banks, along with interest rate movements for savings accounts, mortgages and personal loans.

The study revealed that interest rates for the bulk of the customers of the merged entities remained unchanged, or actually worsened.

In the case of consumers holding saving accounts that require notice of withdrawal, interest rates declined for up to six years after the date of the merger.

By contrast, in the majority of cases, the lending rates applied were not significantly different from the rates used by banks and building societies that had not merged.

The survey concluded that retail banking customers gain little from bank mergers and in some cases can actually lose out.

 

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