Bank Merger

17 Pages 4134 Words

Abstract
This paper discusses the bank merger between Memphis based National Bank of Commerce (National Commerce Financial-Holding Company) and Sun Trust Bank (Sun Trust, Inc. –Holding Company). This paper does not seek to present evidence in support or against the merger. It merely supplies a review of each institution and an educated prediction of resulting entity. This paper relies on information mostly gained from marketing and/or literature from each perspective bank’s web site, brochures or other sales mediums rather than data validated by an independent third party. Overall, we stress that while economy of scale provides the financial stability necessary for the entities to compete in today’s financial markets in the US and globally, there remains a need for Memphis-based “community champions” which are directly focused on serving the needs of local consumers.



Introduction
Some analysis today suggests that one the causes of the Great Depression in the U.S. was bank over competition. This was solved in part through the passing of the Glass-Steagall Act, which forced financial firms to choose between wholesale and retail banking also called Money Centers, and the 1928 McFadden Act which prohibited interstate banking.

Though this restrictive environment was meant to diminish competition, it resulted in the growing interest of bank mergers amongst large banks. This occurred when the Money-center banks began shifting focus from consumers to large deposits. This trend grew so prevalent that money-center banks started fighting with the Federal Reserve in the 1960s over their ability to access purchased funds through the newly created deposit instruments such as negotiable CDs. The fight ended with the large banks gaining unimpeded access to large deposits, both in the US and Europe.

The competition resulted in a buyers market where high interest rates were aggressively offered. High interest rates...