| Abstract: |
Although there is anecdotal evidence that merger control may constitute a
barrier to the integration of European retail banking markets, systematic
empirical evidence is missing until now. This paper aims to fill this gap.
Based on a unique dataset on the transparency on merger control in the EU
banking sector, we estimate the probability that a bank is taken over as a
function of its characteristics, country characteristics and the transparency
of merger control in the banking sector. The results indicate that a bank is
systematically more likely to be taken over by foreign credit institutions if
the regulatory process is transparent. Particularly large banks are less
likely to be taken over by foreign credit institutions if merger control lacks
transparency. This is in line with the hypothesis that governments may block
crossborder bank merger because they want the largest institution in the
country to be domestically owned. Domestic mergers are not affected. This
suggests that merger control may therefore constitute an important barrier to
cross-border consolidation and that further integration of EU banking markets
requires a higher degree of transparency of the regulatory process. |