Banking mergers can make or break financial stability, study finds.
Consolidation policy in banking networks can affect financial stability. By analyzing how mergers and acquisitions change network structures, researchers found that different approaches can either strengthen or weaken the system. The presence of a central hub can be helpful in well-capitalized markets but risky in poorly capitalized ones. The choice of competitive settings depends on the size of the market and bank capitalization levels. Antitrust authorities should consider market conditions when regulating M&A activities.