Merger and acquisition in the banking industry in nigeria abstract banking is in the midst of change that has arisen due to economic depression. Wheelock and wilson 2004 find that expected merger activity in us banking is positively related to management rating, bank size, competitive position and geographical location of banks and negatively related to market concentration. This, in turn, increases the creditcreation capacity of the merged bank tremendously. A negotiable instrument issued by a bank in exchange for funds, usually bearing. A bill of exchange or draft may be defined as an order drawn by one party, called the drawer, on another party, called the drawee, for the. The reserve bank is an integral part of the payment systems as it monitors, supervisors and regulates the whole payment system processes.
Banking industry, mergers and acquisitions, garch analysis, the capm model. Karim 2001 argued in support of banking mergers currently undertaken in the malaysian banking industry. The aim of this paper is to probe the motives of banks for mergers and acquisition with special reference to indian banking industry. These mergers could impact almost every other individual who has a savings account or fd with a psu bank. Select multiple pdf files and merge them in seconds. The law of banking, negotiable instruments and insurance is a vast area of commercial law governing various commercial transactions involving banks and their activities, negotiable instruments such as checks, shares or stocks and warehouse goods deposit certificates and insurance companies and their activities. We have examined in this study the bank mergers experience in lebanon, where between 1994 and 2002, 25 bank merger operations took place. Although in theory the result of a merger may sound promising, such positive outcomes are rare across the world going by previous empirical findings, such as mat nor, et al. In this study i will discuss thoroughly the mergers and acquisitions in the uk banking industry and their impact on the shareholders wealth. Merging banking, investment, and insurance functions allows traditional. The financial inclusion agenda has led to several types of banking.
Mergers and acquisitions as instruments of strategic. The primary objective behind this move is to attain growth at the strategic level in terms of size and customer base. The effect of mergers and acquisitions on the performance of companies. With money being the major medium of exchange, payments systems were developed out of a need to facilitate growth of commerce and economic development. Electronic banking using atelephone connection telephone banking and the first banking services.
The main motive behind the merger and acquisition in the banking industry is to achieve economies of scale and scope. Estimation of the impact of mergers in the banking. An instrument is a tradeable asset or negotiable item such as a security, commodity, derivative or index, or any item that underlies a derivative. Online banking over the internet to perform multiple types of transactions. Phase i 1786 1969 initial phase of banking in india when many small banks were set up phase ii 1969 1991 nationalisation, regularisation and growth phase iii 1991 onwards liberalisation and its aftermath reasons for bank merger. The objective of this paper is to examine whether the 2004 bank consolidation exercise in nigeria has influenced positively the credit allocation and saving mobilization through reduced cost of borrowing and increased returns on savings respectively. Merger of two weaker banks or merger of one health bank with one weak bank can be treated as the faster and less costly way to improve profitability then spurring internal growth franz, h. In the words of a banking analyst at merrill lynch. Since 1990s, the european banking industry has experienced an unprecedented level of merger activity that has considerably influenced the sectors structure.
Understanding bank instruments, from bank to end investor posted apr 9, 2010, 11. Currency 1 is an important means of payment in india, with 19% of m3 represented by currency, as against its share of 6 to 7% in advanced countries. Moreover, i decided to deal with the banking industry as it is one of the most energetic markets. The merger took place in mid 1999s and the effect was the alpha bank. Various types of financial instruments have been identified by researchers, but. Banking instruments banking instruments include cheques, drafts, bills of exchange, credit notes etc. Mergers and acquisitions in indian banking sector mergers and acquisitions in the banking sector is a common phenomenon across the world. The history of indian banking can be divided into three main phases. A bank is a financial institution that accepts deposits and recurring accounts from the people. Developing defensive tactics the target firms which can be made an easy prey of hostile merger, takeover or acquisition or otherwise take the recourse of an investment banking firm and a law firm which specializes in mergers. Chapter 9 negotiable instruments and banking andrew a.
For this purpose sample of 17 mergers post liberalization of. Some significant decisions and statutes in commercial law and banking also merit discussion. In a merger, the bank that absorbs the bank acquired. The purpose of the study is to examine the impact of merger and acquisition of banks on their financial performance. The former is a backward merger and the latter may be termed as a forward merger. The article describes the different types of payment systems.
Under the circumstances, it is useful to look at bank merger activity and u. A deposit slip is a written form of notification that reflects the amount of money deposited to an account by an account holder. There are several banking instrument, some of which are stated below. Note, too, that investordepositors own claims on the bank itself pdf file to word file converter. Substantial gains from mergers are expected to come from cost savings. Mergers and acquisitions in the uk banking industry and. Details of various banking instruments along with terms used in online. Types of payment systems and instruments reserve bank of. An investment bank is a financial services company or corporate division that engages in. Mergers and acquisitions in the banking sector and. If a company wants to go public or sell debt to investors, it often uses an investment bank. Law of banking, negotiable instruments and insurance. Banking mergers and acquisitions performance in europe.
Sufian and fadzlan 2004 points out that bank negara malaysia bnm had. Objectives of the study the main objective of this study is to examine the effects of mergers and acquisition on the financial performance of deposit money banks in the. Mergers and acquisitions in indian banking sector a. Standard setters face strong opposition from the banking industry when proposing new standards that change their preferred mixed model by introducing fair value measurements for all derivative instruments sfas 3, ias 39 or extending fair value accounting to all financial instruments, as. The effect of mergers and acquisitions on bank performance. Efstathios demetriades3, kavala institute of technology abstract this study investigates the merger effects of two banks. The theory and practice of financial instruments for small. His support for merger is based on the finding that banking efficiency increases as bank size increases. In this article different types of payment systems are. Vision 2020 would help the industry to understand the future evolution of banking and the evolving strategies for reaping maximum benefits from the changing scenario in banking and financial landscape. Section iii summarizes the g10 report on consolidation and monetary policy, laying out the reasons why one might expect consolidation to have effects on monetary policymaking, the evidence gathered by the task force, and the conclusions reached. Customer preferences are based on availability, costs and convenience.
A merger refers to an agreement in which two companies join together to form one company. Electronic banking can be divided on the basis of the instruments used. Banking instruments are referred to as the documents used in processing the activities of bank. The principal instruments of banking are 1 money and currency, 2 checks, 3 bills of exchange or drafts, 4 acceptances, 5 promissory notes. Bank instruments is a common expression for different types of instruments used for different financial solutions and purposes, issued by banks through bank instrument providers. This article analyzes the recent merger and acquisition movement within commercial banking. Electronic banking is a service that specifically uses electronic communication forms. Types of payment systems and instruments everyday people tradeexchange goods and services for money. Some of the specific issues highlighted in the paper cover the merger policies of rbi, competition regulation issue between cci and rbi, etc. The effect of mergers and acquisitions on the performance. It is in this context, we hope that this report on banking on the future.
Overview of investment banking functions in mergers. In contrast to the important effects of interstate banking legislation on commercial banking structure. Types of mergers there are five different types of. It is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, with the payer named on the document.
Accounting for financial instruments in the banking. Therefore it is unsurprising that during the second half of the last decade, the most frequent words used in reports on banking were merger and acquisition 2. Paperwork and keeping financial trail of fixed deposits made will increase a bit. Pdf analysing the motives and the outcomes of bank mergers. An investment bank may also assist companies involved in mergers and. Payment systems are very important in the functioning of the economy. A debt elimination scheme is a plan that is advertised as a way for an individual to eliminate various types of debt simply by paying. Brockington 1987, kurfi 2003 and umoren 2007, defines a merger as an arrangement by. In this light, the following objectives and examined. It is supplemented by cheques and drafts for payments in commercial transactions. Mergers and acquisitions in the indian banking sector mergers and acquisitions in indian banking sector pdf thesis pdf available may 2016 with 14,035 reads how we measure reads.
Integration and information technology effects on merger. Introduction to mergers and acquisitions 3 acquisitions and takeovers an acquisition, according to krishnamurti and vishwanath 2008 is the purchase of by one company the acquirer of a substantial part of the assets or the securities of another target company. Merger integration challenges are especially prominent in the commercial banking industry, in which the integration between bank business processes and systems is critical to the success of merging banks. A check may be defined as a written order on a bank or banker for the payment of money. In this article, we look at different types of mergers that companies can undergo. As government seek to improve economic efficiency and better allocation of resources to solve the problem of economic depression, policy makers are shifting towards openness, competitiveness and market discipline.
In other words, a merger is the combination of two companies into a single legal entity. The effect of mergers and acquisitions on financial performance of banks a survey of commercial banks in kenya 1. It can be the key to uniting stakeholders and accelerating success. Mergers and acquisitions of higher education institutions are relatively rare, but each merger or acquisition provides a rich and distinctive example of major strategic organizational change. Understanding bank instruments, from bank to end investor. In the literature on mergers of higher education organizations, there does not appear to be a clear set of financial or quality metrics to assess success. Bank consolidation and financial inclusion harvard university. In the following, i discuss two types of bank mergers in sequence.
Background of the study this section broadly discussed the concept of mergers and acquisitions highlighting how it has been done over the years by various sectors of the economy. The procedure for voluntary merger among banks has been laid down under section 44a of the br act, 1949. This study measures the performance of egyptian banks that have undergone mergers or acquisitions during the period 20022007. Because banking restructuring is an integral part of the country, banking authorities need to focus that whether this merger or acquisition increase the financial health of the entities or not, sound banking. A large number of international and domestic banks all over the world are engaged in merger and acquisition activities. One of the principal objectives behind the mergers and acquisitions in the banking sector is to reap the benefits of economies of scale. Merger in banking industry can be classified as horizontal merger because the merged banks capable to develop their customer bases by getting into the same industry and similar of commercial activities mergers and acquisitions, 2010. The value effects of bank mergers and acquisitions. Impact of merger and acquisition on financial performance. Investment banks help businesses raise capital in financial markets.
To the federal reserve, the most important aspect of a merger is that it will result in a solid institution. Dictionary of banking terms and phrases helpwithmybank. The effect of mergers and acquisitions on financial. A bank is generally understood as an institution which provides fundamental banking services such as accepting deposits and providing loans. The investment bankers then guide the target company to adopt such tactics which can prevent them from mergers. Pdf notes on banking and finance download lecture notes for money and banking pdf 8p download free online. With 27 public sector banks, including the second largest pnb, being merged and reduced to 12, almost every other. This kind of bank also may advise corporations on mergers and acquisitions.