The Affects of Bank Mergers on Customers & Associates

Bank mergers have increased rapidly in the past few years. Many wonder are so many mergers really necessary. The consolidation of two large banks could affect the relationship between the community, customer and the employee. Along with the merging of the two industries comes change for everyone involved. There is a lot of competition in the banking industry, which is the main reason for so many bank mergers. Bank mergers can improve competition and can be beneficial to the community if both financial institutions are in agreement with doing what is best for everyone involved. Banks should consider other options before taking a chance on losing good customers, loyal employees and trust in the community. The merger between two national banks will affect the community in many ways. Big organizations have a way of changing while they merge. The biggest concern will be relationship management between the two corporations. “You want to be able to call the person there and (have confidence) that they know you, especially if you have to rush something through, like a line of credit” (Wasserman 2). If you don’t know the person with whom you are working with, it may take a little longer than expected to get the job done in a timely manner suitable for the customer. You have to gain the trust and respect of your fellow co-workers. Merged banks don’t give you the total borrowing capacity that you were use to before the merger. It will be cut back, along with a lot of other valuable services that could cause you to lose some top dollar customers. “Some employees may find themselves with different relationship officers, who aren’t as familiar with the accounts as the previous officers had been-and who may be stretched a little thinner than in the past. For some, this will be reason enough to find a new bank” (Kidder 1). When customers are comfortable with the employee they have been doing business with for years, they are not so eager to change banks.

Another affect of a bank merger on the community is the closing of local branches. Most banks eliminate costs by closing overlapping retail branches. “Some customers will be forced to bank else where because of the retail branch relocation” (Johnson 3). The low-income communities are hit the hardest by bank mergers. The banking industry will limit its services in the poorer areas of the community. “In order to be effective and respected, the financial institution must represent the community and have the willingness and ability to stand up for the community's concerns” (Dickerson 1). Financial institutions should invest in and serve the needs of all segments of their communities. Anything that reduces value will affect local communities. “Giant banks could institute higher fees and rates, change credit terms and corporate lending relationships, or choose not to renew a line of credit that isn’t deemed profitable enough” (Kidder 2). Bank consolidations could lead to higher interest rates, lower real estate prices and unfinished construction projects. Without cutting costs, there are more dollars to be made which will result in more loans being made to customers in all communities.

The merging of two corporate banks will also affect the employees of each institution. The miscommunication between the bank and the employees leads to misunderstanding and lack of trust in the workplace. Merging banks should consult the employees before making a decision that will affect their future as well as their families. “Bank consolidations usually hurt the employee’s access to capital” (Johnson 4). They will have to wait until a certain time before they can touch the stock they have in the bank. Some banks eliminate some of the benefits they offered to the employees before the merger took place. The employees no longer get the profit sharing, required number of vacation days, paid time off/sick days, 401k match percentage or company stock that was previously given. Many departments between the two merging banks will consolidate because of the overlapping.