Internet Marketing

Bank Consolidation

It is a usual saying that money determines the strength of an economy hence,the need for financial institutions in an economy cannot be undermined.Financial institutions are pillars of a nation economy which determines the level of investment aswellas economic stability in a country.Banks are recognized as major agents or tools which are used in the financial sector of a country.However,the presence of too many weak banks in a country can also constitute problems to the nation economy and as such as proven that such economy will not experience economic growth development hence, the need for bank consolidation.It has been said thatb bank consoplidation is the process by which the banks in a contry comes together to form a strong and stabilized banking system through merger and acquisition.This bank consolidation exercise are always in different phases inorder to ensure a unified form of the bank operations aswellas easy transactions among the banks in the country.However,it has been discovered that bank consolidation exercise always lead to economic problems within the short run such as unemployment and low rate of investment because most of this banks look forward to ensure increase in their capial base and also try to ensure that they have enough money to run their busuiness operayions.Should it be said that bank consolidation improves the growth of an economy?Only the monetary authorities can tell.It is a fact that this bank consolidation exercise reduces the number of banks in the country which futher leads to reduction of manpower.Though the economic effect of bank consolidation in the short-run discourages investment because most banks desire to increase their capital base and are busy with their merger and acquisition plans.Thebig banks however take control of the smaller banks who can not contribute tio the growth of the economy effectivelly.Despite the fact that most developing nations adopt this strategy inorder to strengthen their financial sector and to improve the level of investment aswellas making loans available to ailing sectors the seal for improvment has not beentruly manifested due to the waek purchasing power of their currencies.We may say it is better to have fewer banks wo are financially boyant than to have many weak banks who can not promote investment in the country but it is vital to note that the essence is not just on the financial strength of these banks but it solely lies on the manetary policies put in place inorder to ensure that they perform and operate effectively and provide loans to investors who are ready to contibute to the growth of the nation.However,we must consider the fact that increase in investment will only lead to an increase in the gross domestic product of the nation hence,economic growth and proper regulation of the monetatry policy need to be checked along side with other fiscal polies of the government inorder to increase economic outputs in the country.

Futhermore,bank consolidation may also take the form of a unified cheque system by the banks in the country.This is when all the banks in the country are nade to adopt the same cheque pattern in a view for easy transactions and clearance of cheques aswellas discouraging the use of dud cheques by criminals.Indeed,bank consolidation affords the banks eay transactions among themselves and increase the asset base of the banks hence,banks and other financial institutions will be able to inance bigger investments and projects which will enhance and earn them larger profits.The fact remains that bank consolidation exercise is aimed at adopting a stronger monetatry sector and encouaging foreign banks with larger capital to ibnvest in the economy.The bank consolidation exercise is very common in developed and developing countries who aspires to achieve economic growth development however,it postulates economic hardship in the short-run but yields great benefits and profits in the long-run.

Bank consolidation

Article Published: Thursday 12th April 2007