How do mergers affect communities, Corporate Finance

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How do mergers affect communities?

A:
When a locally controlled bank is merged into a bank headquartered elsewhere (an out-of-market merger), some apprehension about the institution's future commitment to the local community is bound to result. However, because such mergers generally are motivated by a bank's desire to gain access to a new market, commitment to the community often is actually enhanced. Banks, aware that merger transactions focus public attention on their role in the community, frequently demonstrate their commitment immediately through greater lending activity. Banking regulators monitor both the statements of commitment made by institutions at the time of a merger or acquisition, as well as banks' performance under the Community Reinvestment Act, which requires banks to serve all parts of the community.


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