What’s Happened at Divested Bank Offices? An Analysis of Antitrust Divestitures in Bank Mergers in the U.S.

Abstract

In their competitive analysis of proposed bank mergers, the Board of Governors of the Federal Reserve System, the U.S. Department of Justice, and other U.S. banking agencies accept branch divestitures as an antitrust remedy in local markets where there is substantial overlap between the acquirer and target. The results of this study, which examines the performance of 751 branches that were divested between June 1989 and June 1999 in conjunction with a merger in the U.S. that raised possible competition issues, are consistent with the policy of accepting branch divestitures as an antitrust remedy being successful. Divested branches operate for lengths of time that are comparable to all branches, and even though they experience substantial deposit runoff around the time of the merger, divested branches subsequently exhibit deposit growth rates that are comparable to those of other similar branches