ABSTRACT
Why do bank mergers take place? The straightforward answer for an economist should be: because there are economies of scale and scope (a la Chandler) in banking as in other branches of economic activity. This would mean that when two banks merge, or when one bank absorbs another, the resulting larger unit is more profitable than the previous two units in isolation. A key concept often mentioned here is synergy, a word which is not included in all dictionaries (synergism seems to be preferred), but which refers to the combination or common action of two organisms having effects which are not achievable by each organism separately. This is a rather biological concept, and why synergism should appear in living beings is something I cannot speculate upon here. In economics, however, this synergism can only be derived from economies of scale and/or scope.2 Economies of scale or scope imply the existence of fixed costs, that is, costs which do not increase in proportion to output. Economies of scale or fixed costs thus seem to be the most acceptable explanation for mergers and combinations, in banking and in other fields of enterprise. However, many students (and at least some bankers I have talked to) doubt the existence of economies of scale in banking as a general rule. In fact the case for economies of scale as a powerful factor in bank mergers is widely disputed, and while there is no agreement on this point, the majority of scholars seem to be sceptical, although there is a respectable minority who affirm their existence. Here I am going to give a sample of academic opinion, mostly dealing with bank mergers in the United States, which is the most thoroughly researched country, although there is a growing body of studies on European countries, including Spain. Then I will deal with my main topic, bank mergers in Spanish history.
