Cross-border M&As have also increased significantly in the last decade despite remaining inferior in number and size relative to domestic transactions,. Whereas during the period 2000-2004, cross-border deals accounted on average for only 14% of the total value of M&As in the euro area, this percentage increased to 38% between 2005 and 2006 (ECB, 2007a); and it is expected to grow further also in light of the high levels of domestic concentration reached in some countries.
Few domestic mergers have led so far to significant competitive concerns and have been blocked by the competition authority, withdrawn or subject to remedies. This contrasts with the US, where typically mergers have been approved subject to some branch divestiture to limit concentration in the local markets.8 This may reflect different worries of the competition authorities. In the US, as well as in the UK, there is a concern about the effect of consolidation on retail banking and, in particular, on lending to SME.9 In contrast, in continental Europe market power at the local level does not seem to be always perceived as a big problem by national authorities. In Spain, for example, mergers of large domestic banks (like Santander with Central Hispano in October 1999, or Bilbao- Vizcaya with Argentaria in January 1999) raised concerns only in terms of the potential softening of competition in the product market deriving from concentrated equity participations in industries like energy or telecommunications. In Belgium, no remedies have been imposed to bank mergers so far despite the high sector concentration. In general, national regulatory authorities in Europe, with the acquiescence sometimes of competition authorities, have worried more about protecting and enlarging their national champions than about the possible consequences of consolidation for customers. Nevertheless, mergers among large national banks (like UBS and SBC in Switzerland)10 do seem to have a potentially large impact at the retail level which needs to be carefully examined.
Prager and Hannan (1998) provide evidence that horizontal mergers of US banks in the period 1991-94 increase market power. In the UK concerns about market power in the payments system also have lead to its regulation by the Office of Fair Trading.
See Neven and Von Ungern-Sternberg (1998).