An impact analysis on the exemption of the banking sector from the merger control regime in Turkey

Abstract

Turkish Banking Act exempts certain bank mergers from the Turkish merger control regime. With this legislation, a large number of the potential bank merger are exempted from obtaining the permission from the Turkish Competition Authority. Turkish Competition Authority and international organizations such as European Commission and OECD object strongly to this exemption. However, no impact analysis on the banking industry exemption has been worked so far neither by regulatory bodies nor academicians. The main motivation of this study is to carry out an impact analysis of the current legislation in order to contribute to the discussions on preserving or abolishing the banking industry exemption. For this aim, we estimate a discrete choice model of demand for loan services and run a series of simulations for hypothetical bank mergers. Our results witness that welfare decreasing effects of the bank mergers covered by the exemption are very low and can be tolerated.