Why prior to the financial crisis in 2008, were there so many mergers each year in...

Why prior to the financial crisis in 2008, were there so many mergers each year in the financial-services industries?

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Expert Solution

The reason for so many mergers in the financial-services industries prior to the 2008 financial crisis was due to the fact that the financial-services industries were undergoing a consolidation mainly at the national level.

After the introduction of Riegle-Neal Interstate Banking and Branching Efficiency Act in 1994 banks were allowed to provide branch banking in more than one state and throughout USA. This was followed by the Gramm-Leach-Bliley Act of 1999 which allowed banking companies to enter the domain of other financial markets. This act led banks to provide additional financial services to its customers like insurance service.

The above two acts spurred a series of mergers and acquisitions (M&As) in the banking industry and this went on till 2008 when the financial meltdown occurred. The above laws changed the landscape of the industry and the financial services sector was no longer a fragmented industry but a better defined and unified industry. This led to consolidation within the industry with large banks buying small banks, banks buying insurance companies and other financial services company.

jeff jeffy answered 1 year ago

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