An analysis of UK bank and building society mergers has found that although these mergers have generated substantial efficiencies for the banks concerned, these benefits have not been passed on to customers.
The study discovered that while most merging institutions have benefited from the amalgamations, interest rates for the bulk of banking customers remain unchanged. Indeed, savers who hold notice saving accounts with merging banks and building societies have suffered a decline in interest rates up to six years after a merger takes place.
John Ashton and Khac Pham examined 61 UK bank mergers occurring between 1988 and 2004. For each of these mergers, efficiency changes were recorded for individual banks and interest rate movements were recorded for savings accounts, mortgages and personal loans, while data from Moneyfacts.co.uk was used to make these detailed interest rate comparisons.
Commenting on the findings, Dr Ashton said: Retail banking customers gain little from bank mergers and in some cases can lose out from mergers. Consequently, the consumer perspective must be given more consideration when assessing the merits of future potential banks mergers.
