1. Background of the Study
As a consequence of growing international financial competition and the tendency of financial businesses to diversify their management, mergers between financial institutions have become more and more common. When handling such mergers, the competent authorities of the financial industry and competition law take different factors into consideration and thus it is not impossible that conflicts can arise between their efforts to stabilize the financial environment, promote development for the financial industry, and ensure fair competition. How the FTC should adopt the opinions of the competent authorities of various industries on certain issues, the extent of their involvement, and the particular features of the industries must all be evaluated carefully.
This study is an assessment of the measures taken to regulate financial institution mergers. It is conducted based on close observation and understanding of the financial industry and the financial institution merger types in the past and the regulatory experiences in other countries.
2. Methodology and Process of the Study
Initially, the development of the domestic financial industry is examined by the study. Complete statistic analysis is conducted on the market share of each financial enterprise and the level of market concentration. Also, various types of corporate acquisitions prescribed in supervisory regulations on financial institution mergers are studied.
Moreover, the details of the merger cases involving banks, insurance businesses and securities firms that the FTC has handled in recent years are compiled and scrutinized so that the handling approaches and regulatory criteria in this country. The results are compared with the merger regulations and financial institution mergers in other countries to establish references for law enforcement in the future.
3. Main Suggestions
The findings of this study show that the level of market concentration in each type pf financial market, namely banking, insurance or securities market is generally not high and competition is fierce. After the enactment of the Financial Institutions Merger Act and related laws, and under the government policy in promoting consolidation in the financial industry, the number of financial businesses in the country has gradually decreased and the development toward large financial groups has been the major tendency. Since the focus in reviewing financial institution merger applications according to the supervisory regulations is set on the improvement of management efficiency and the stabilization of financial order, whether competition continues to exist among businesses counts on the surveillance of the competition law authority. To help keep the balance between government policies toward the financial industry and continuation of market competition, the following suggestions are proposed by the study:
(1) Understanding current financial regulations and directions of future amendment
Mergers between financial institutions are subject to financial regulations. Therefore, besides capital and cost considerations, permission from the competent authority of the financial industry is required before any industry participants can begin their specific financial operations. Consequently, the analysis of the impact of any merger on market competition can be conducted solely based on the management of the current operators on the market and potential competitors need not be taken into account. However, when specific financial products are involved, it will be necessary to assess the influence on other financial businesses that are able to run the same operation as well as to make sure whether related financial regulations allow such cross-trade operations, and the financial businesses able to engage in the same operation or provide the same product or service should be taken into consideration under market definition.
(2) Appropriate relaxation on the criteria in evaluation of possible competition restriction
The level of market concentration in each type of domestic financial market is low, such as life insurance, property insurance, securities brokerage, dealing and underwriting, or bank loan, deposit and credit services. Sales conditions and specifications of financial product are either determined by or require the approval of the competent authority of the financial industry. It is difficult for financial businesses to engage in anti-competitive conduct such as random increase of product or service prices or abuse of market power. Thus, as long as there exist a certain number of competitors on the market, there is no need to impose strict evaluation criteria.
(3) Post-merger supervision with the competent authority of the financial industry
The decisions the competition law authority makes on merger applications are often based on its assessment of the current market. As the evaluation of the post-merger market is conducted before the merger is actually done, there are some uncertainties. For future merger cases in which inconsistency with competition regulations seem likely and attached conditions are deemed necessary, such as corrective measures against illegal acts of merged parties like improper price fixing or refusal to provide sales channels to other businesses, the FTC ought to consider working with the competent authority of the financial industry to carry out post-merger supervision since it is the conferred duty of the competent authority of the financial industry and the obligation of financial businesses to disclose certain information as set forth in financial regulations.