Perspectives of Macrofinance Regulation of Banking M&A in the Context of the International Reform of Banking Regulation

Abstract

Mergers and acquisitions (M&A) in the banking industry pose serious threat to the post-crisis recovery amid the increasing interconnectedness of credit institutions. Yet M&A remain one of the least manageable contributors to minimization of systemic risk, should post-M&A process run short of objectives and synergy. Financial markets externalities and adverse scenarios of macro-level dynamics put additional challenges to post-M&A integration, while shortage of macroprudential policy tools fails to empower regulators in designing a roadmap towards minimization of systemic risks built in the M&A processes. Guided by the objectives of the international banking regulation reform (Basel III) we pioneer a principally new idea extending risk-centered regulation over M&A specifics aiming at integrity of banking consolidations that is highly relevant and material for resilience of the banking sector, mitigation of financial markets volatility and ultimately for financial stability. We also propose a single conceptual platform of an M&A-related rulebook as well as an M&A risk matrix that would further shape the mechanism of systemic risk alarmism.