Canadian bank mergers, the public interest and public policy

Abstract

The Canadian banking system is highly concentrated. This is partially due to normal market attrition, but more significantly is the result of a protracted series of mergers. Since all bank mergers have to be approved by the Federal government, the fundamental public policy question is why the government allowed the mergers and sos assisted the concentration process. This paper attempts to determine whether the mergers which have taken place since 1955 have been in the “public interest”. The conclusion is that, on the basis of the available evidence, they have not. To arrive at this conclusion the author first specifies the appropriate “public interest” criteria. These criteria are then applied to the mergers in question. The implications for policy are laid out in the conclusion.

JEL: E61, G21