The Affects of Bank Mergers on Customers & AssociatesEssay title: The Affects of Bank Mergers on Customers & AssociatesBank mergers have increased rapidly in the past few years. Many wonder are so many mergers really necessary. The consolidation of two large banks could affect the relationship between the community, customer and the employee. Along with the merging of the two industries comes change for everyone involved. There is a lot of competition in the banking industry, which is the main reason for so many bank mergers. Bank mergers can improve competition and can be beneficial to the community if both financial institutions are in agreement with doing what is best for everyone involved. Banks should consider other options before taking a chance on losing good customers, loyal employees and trust in the community.
The merger between two national banks will affect the community in many ways. Big organizations have a way of changing while they merge. The biggest concern will be relationship management between the two corporations. “You want to be able to call the person there and (have confidence) that they know you, especially if you have to rush something through, like a line of credit” (Wasserman 2). If you don’t know the person with whom you are working with, it may take a little longer than expected to get the job done in a timely manner suitable for the customer. You have to gain the trust and respect of your fellow co-workers. Merged banks don’t give you the total borrowing capacity that you were use to before the merger. It will be cut back, along with a lot of other valuable services that could cause you to lose some top dollar customers. “Some employees may find themselves with different relationship officers, who aren’t as familiar with the accounts as the previous officers had been-and who may be stretched a little thinner than in the past. For some, this will be reason enough to find a new bank” (Kidder 1). When customers are comfortable with the employee they have been doing business with for years, they are not so eager to change banks.
Another affect of a bank merger on the community is the closing of local branches. Most banks eliminate costs by closing overlapping retail branches. “Some customers will be forced to bank else where because of the retail branch relocation” (Johnson 3). The low-income communities are hit the hardest by bank mergers. The banking industry will limit its services in the poorer areas of the community. “In order to be effective and respected, the financial institution must represent the community and have the willingness and ability to stand up for the communitys concerns” (Dickerson 1). Financial institutions should invest in and serve the needs of all segments of their communities. Anything that reduces value will affect local communities. “Giant banks could institute higher fees and rates, change credit terms and corporate lending relationships, or choose not to renew a line of credit that isn’t deemed profitable enough” (Kidder 2). Bank consolidations could lead to higher interest rates, lower real estate prices and unfinished construction projects. Without cutting costs, there are more dollars to be made which will result in more loans being made to customers in all communities.
The merging of two corporate banks will also affect the employees of each institution. The miscommunication between the bank and the employees leads to misunderstanding and lack of trust in the workplace. Merging banks should consult the employees before making a decision that will affect their future as well as their families. “Bank consolidations usually hurt the employee’s access to capital” (Johnson 4). They will have to wait until a certain time before they can touch the stock they have in the bank. Some banks eliminate some of the benefits they offered to the employees before the merger took place. The employees no longer get the profit sharing, required number of vacation days, paid time off/sick days, 401k match percentage or company stock that was previously given. Many departments between the two merging banks will consolidate because of the overlapping.
The merger of two corporations will also affect the employees of each institution. It is important to focus on the employees in their workplaces to better understand their personal situations. Employees of a bank are able to organize any part of their business (financials, accounts, businesses) to reach a decision and have them decide. Employees of big firms are able to leverage their employees in their interests with that strategy. Many bankers and CEOs feel that a merger is bad for the individual as they have to work with the bigger firms to be able to manage the businesses. They are less likely to take advantage of their own capital (financials) and their work could be at risk.
Citigroup in 2012 became the first major bank to be merged to form an independent investment bank. The merger has significant negative impact on the country’s financial system. This would have led to a massive transfer of wealth that would have been the direct cause of the financial collapse. The financial crisis of 2008-09 was an economic and social calamity that took a toll on people and the economy. This is why there is growing speculation. In the banking sector, which had long suffered from the bad economy, the merger of two banks has the potential to make some immediate financial and economic changes. It strengthens a system of checks and balances between big banks that has been under intense pressure for many years and can potentially lead to changes in corporate conduct at a national level (Davies 2011; Vickers 2011). The merger will give a boost to the banking system and provide a sense of urgency in terms of changes in financial practices (Brown 2005–2008). Major European banks, with similar policies, now face similar problems.
Banks with large bank accounts in the United States can benefit from the merger with the merger. They have the ability to provide liquidity to their customers. This financial stability is important to other banks. For instance, while a large part of Wells Fargo continues to serve as a financial center, it is now owned and operated by a large company that includes large American banks. Wells Fargo needs these large American banks to operate in the United States. As a result, it is easy for banks to take advantage of a merger and sell some of their large American capital for pennies on the dollar.
The decision made by American banks is primarily for their own benefit rather than for the benefit of the large American banking industry. It is true that large financial institutions could benefit from a merger but this is an example of how huge large financial centers would do very small things when merging. As the merger is discussed in this chapter, the big banks will see the potential for bad things if they are given the power to control decisions for themselves. If a large corporate decision was made, the big banks could be forced into large consolidation activities.
As the merger is discussed here, a merger between two large financial centers will not hurt the financial system or the communities in which they operate. The bank consolidations that are taken place in other European countries will probably result in smaller banks getting the bigger financial support that they currently have. These arrangements will have the opposite effect on the banks that would become a part of these centers, creating a negative impact on their economies and working economy.
To summarize this discussion, American banks should be careful not to take advantage of a merger by letting the mergers take place in other countries. The decision taken by corporations, like those in other countries, is in the people’s best interests.
References