NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston

Charles W. Calomiris, Thanavut Pornrojnangkool

NBER Working Paper No. 11351
Issued in May 2005
NBER Program(s):   IO

The merger of Fleet and BankBoston in September 1999 resulted in a regional New England lending market in which only one large, universal bank remained. We explore the extent to which that merger resulted in monopoly rents for the combined entity in some niches within the regional loan market. For small- and medium-sized middle-market borrowers, prior to the merger, Fleet and BankBoston charged unusually low loan interest rates, reflecting their ability to realize economies of scope and scale. After the merger, those cost savings were no longer passed on to medium-sized middle-market borrowers, which resulted in an increase in the average interest rate credit spreads to those borrowers of roughly one percent. Small-sized middle-market borrowers (which continued to enjoy the advantage of loan market competition from remaining small banks) maintained their low spreads. Our results suggest that it may be desirable for regulators to consider the concentration in lending markets in addition to deposit markets when evaluating mergers and structuring appropriate divestiture requirements.

download in pdf format
   (989 K)

email paper

This paper is available as PDF (989 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11351

Users who downloaded this paper also downloaded these:
Mishkin w5849 Bank Consolidation: A Central Banker's Perspective
Calomiris and Karceski Is the Bank Merger Wave of the 1990s Efficient? Lessons from Nine Case Studies
Carow, Kane, and Narayanan w10623 How Have Borrowers Fared in Banking Mega-Mergers?
Harada and Ito w14518 Did Mergers Help Japanese Mega-Banks Avoid Failure? Analysis of the Distance to Default of Banks
Beck Bank Concentration and Fragility. Impact and Mechanics
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us