Bank Consolidation, in general is referred to a merger of banks. When a merger of banks takes place, significant saving is done by closing down overlapping branches, laying off of unnecessary staff, selling of not require capital goods. Increase in revenue may result when various products of the different merged banks are taken up for sale from branches of merged banks. As banks carry new products into different geographical markets, this diversification is bound to produce more trade returns. Along with these benefits of Bank Consolidation, there are many drawbacks in this. 

The harsh restructuring that is required after Bank Consolidation to increase the efficiency is resisted by internal opposition in the merged organization. At the time of merger, differences among the merger banks in their work culture and ways of communication can be a costly affair. With merger the managers are subjected to more complicated and vast organization thereby bringing to fore the inefficiencies and lack of expertise required in their field. 

Bank mergers result into stronger market power due to Bank Consolidation. Attaining stronger market power will bring along prices change that is against the benefits of the consumers. It has been found from studies that stronger market power of the bank is used against the interest of the customer; exploiting the customer for extracting higher prices. 

Regarding the change in efficiencies of the two banks that have merged for Bank Consolidation, if the acquirer bank has a higher efficiency than the acquired bank, there is going to be net increase in efficiency of the two merged banks. Also if both acquirer and acquired banks are inefficient then a wake-up alarm for change is the attitude that produces better efficiency in the Consolidation Bank. The mergers involving acquired banks with smaller market shares give rise to lower loan rates while in Bank Consolidation involving in-market mergers lead to higher decrease in loan rates. 

As Bank Consolidation has bought multi layered management, the distance between the agent who collects information about the lender and the agent which has powers to sanction lending to the customer increases thereby leading to lower efficient relationship lending? So the only one that really will benefit from Bank consolidations are the banks and not the consumers! Many banks all over the world do this because for one reason only it benefits the bank with the most power. With today’s economy we have seen many merger’s of banks all over the world. It’s not just in the United States that people are suffering from the fallen economy, but it is all over the world! I’m pretty sure that we will be seeing many more banks all over the world be sold and merged with other banks before the economy gets any better. Or it’s possible that the United States will be bailing out even more smaller banks in the near future. We will see this soon if the economy does not pick up fast! So like always it’s the smaller person who always gets screwed!