Mergers and Acquisitions in Indian Banking Sector

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

The conflict arise and the management felt the pressure because Eagleeye and the investors threatened them that they will sell all of their shares and large institutional will left the bank. The reason is they do not want the firm to spend too much financial capital into the growth plan. Their purpose for the bank is to become an ideal target for other companies to acquire so they can earn the profit from selling the bank.

Compare and contrast today’s structure versus historical structures. Why has consolidation occurred and who will experience benefits and losses – customers, the institutions, etc. Why have bank failures occurred? Are there any consequences of consolidation and failure in the industry?

The purpose of this research is to review the impact of mergers and acquisitions on credit unions as it applies to the principles of money and banking. Specifically we will review the impact of the merger between E & A Credit Union and First Community Federal Credit Union. Mergers and acquisitions are very common in today’s financial environment. According to the Glenn Christensen (2015), there has been an increase in approved mergers again this year, June 2015 over June 2014. Not only are there more and more mergers, the size of the merger is growing as well (Christensen, 2015). As we look at the history of financial institutions over the years, mergers and acquisitions are very common. Mergers and acquisitions have had a significant impact in the decline of the number of banks since 1985 (Mishkin, 2016). Over the past few decades, thousands of banks merged (Wilcox & Dopico, 2011). Credit unions have seen significant numbers in terms of mergers and acquisitions spanning over many years. In 1969 there were 23,866 credit unions with assets totaling $16 billion (Wilcox & Dopico, 2011). This number dropped dramatically by 2010 to only 7,491 credit unions (Wilcox & Dopico, 2011). The assets grew to $927 billion equaling 7.6% of bank assets in comparison to the only 3% held during 1969 (Wilcox & Dopico, 2011). Although there was a 70% reduction in the number of credit unions, credit unions grew in their share of the market..

The largest banking merger in Australia happened by Westpac merging with St. George Bank limited in 2008,which was dramatically decrease impact of the global recession on Westpac’s balance sheet. St. George Bank was one part of Westpac divisions. Furthermore, Westpac turned to be one of authorized deposit-taking institution (ADI) in 2010 (Westpac, n.d.).

The rivalry is also a crucial component of the market structure. It promotes the risk of being substituted to be moderately high. However, the threat of substitution includes not only opponent banks but also non-monetary challengers. In the past one year, the banking industry has raised 24.03%. Looking for future chances is also crucial when determining if the banking industry is worth investing.

The economic recession of 2009 pushed some financial institutions to bankruptcy. The banking industry was also a victim of this economic hardship. Some solid institutions like Bank of America, Trust Bank, and Wells Fargo take over other banks for different reasons: market power, diversification, cost savings, and external growth. These banks acquire all the assets and the liabilities of another bank. These banks obtained the property rights and new market power. This research paper is to look at the economic advantages of the merger and to make some predictions.

The Gram-Leech-Bliley Act allowed this merger to be legal. This act, which revoked the Glass Steagall Act, was the largest achievement for the lobbyists for Wall Street (Repealing Glass-Steagall section, para. 7). This allowed the banks to keep growing and growing so that they were becoming too big to fail. Allowing this merger made it clear to firms that with enough time and money, anything can happen. In the movie Inside Job Willem Buiter states that “why do you have big banks? Well, because banks like monopoly power; because banks like lobbying power; because, banks know that when they’re too big, they will be bailed” (2010). When a single entity has this much power, they will be riskier in their investments which leads to higher short run earnings but destroys the firm in the long run. And with that assurance of being bailed out, they will not care how risky the investments are, just as long as they get their large bonuses. Christine Lagarde brought up this point during Inside Job in saying that “the financial industry is a service industry. It should serve others before it serves itself” (2010). She is insisting that ethics should be one of the first things under consideration. I believe that the paying customers should always be the top priority. Firms usually want to sell their loyal customers a great product, but in this case the firms sold their customers crap investments

Extensive research has determined that the banking industry is in an unstable state. The industry’s profits have

The financial terms of the merger have not been disclosed but transaction has been unanimously approved by the board of directors of both banks.

As the financial system moved forward after the S&L Crisis, what later became known as the parallel banking system began to bloom. In this system, commercial banks began to act like large investment banks and quickly the financial system as a whole became much larger, more complex and much more active in securitization. Some industry analysts say that it was advances in data processing and telecommunication that created economies of scale and scope in finance, and fostered the need for larger and more diversified financial institutions. As these banks became larger and much more powerful, they pressured regulators to strip away all barriers to competition and growth. This began to take hold with the Riegle-Neal Interstate Banking and Branching Efficiency Act in 1994 (RNIBBEA). This allowed bank holding companies to practice nationwide branching and acquire companies in other states. This led to mass consolidation that resulted in the top ten commercial and investment banks owning a combined 10.8 trillion dollars by 2007, and a 25% increase in all industry assets.

The Banking Industry plays an important role in the economic development of the country and is the most dominant segment of the financial sector. Banks encourage economic growth by allocating savings to investments that have potential to yield higher returns. They perform their basic role of accepting deposits and lending funds from these deposits. Banks securely save the money of depositors, provide interest to them, and lend the funds raised from depositors to consumers. They are in a wide range of sizes, from large Global Banks to Regional and Community Banks. We can study the structure of an organized banking industry by taking an example of Indian banking industry:

The United States banking industry has been a problem ever since the fraud and corruption from the market crash of ’08. There have been two sides arguing what we should do to these banks. Many people say, “We need to split up the big banks into smaller banks.” Their argument is that the smaller banks will be easier to monitor to make sure no fraud is going on and it will cause there to be more competition in the industry which will lower interest rates. The other side of the argument where many people also stayed is that the big banks don’t need to be split up. They just need a bailout to get back on their feet and they can sort this mess out. The arguments stand on two principles one side says the banks are corrupt and need to be disbanded, and the other side’s states that the banks are too big to fail; come ground is difficult for these two but they both want to fix the economy.

The banking industry is highly competitive. The financial services industry has beenaround for hundreds of years and just about everyone who needs banking servicesalready has them. Because of this, banks must attempt to lure clients away fromcompetitor banks. They do this by offering lower financing, preferred rates andinvestment services. The banking sector is in a race to see who can offer both the

Mergers and Acquisitions are considered as a significant exercise in the corporate restructuring. With the rise of the financial crises in organisations across the world, there has been an augment in the number of corporate invasions and mergers. Therefore, the announcement of this strategy has become a part of a successful business. In the challenging international business environment and damaged economy, all organisations are seeking such kinds of eccentric techniques for comparative advantage. However, this announcement has both positive and negative impacts. Between two firms, the practice of Mergers and Acquisitions changes the share prices of both acquirer and target firms.