Question

How does consolidation in our financial system affect competition for financial services? Is convergence in our financial system good or bad for competition? please help!! thank you

Answer 1

Consolidation of finacial statements are finacial statements of a group rather than an entity.Parents and subsidiaries finacial statements are presented as those of a single economic entity.

The definition of the financial services industry used here includes commercial banking, investment banking, insurance and, in some cases, asset management. Most other types of financial activity, such as exchanges and specialty finance, are excluded.

affect competition for financial services :

-Policymakers should carefully examine claims of substantial efficiency gains by financial institutions proposing major consolidations, especially in cases where a merger could raise significant issues of market power.

-To increase competition in an environment that is reducing significantly the number of providers of financial services, consideration could be given to reducing obstacles to the mobility of customers across financial service providers.

-To the extent that consolidation may harm small business lending, the problems faced by small firms might be alleviated if alternative sources of finance to traditional bank lending are developed.

Covergence sounds beneficial but most of the institutes turned to losses after that.

So its bad.