open up a growing array of delivery channels. online banking, in all its increasingly varied forms, is poised to become a key channel for transacting banking business. the importance of physical branches in a cyber - world may decline and the nature of the services that branches provide will probably change. technology is here to stay, and the challenge is for bankers to embrace technology to their own and their customers ’ advantage. secondly, in europe, economic, monetary and financial unity has implied increased competition among banks and is forcing them to seek ways to cut costs and to increase market share. thirdly, it is believed that the banking and securities industry might in time consolidate into about 15 world mega - firms and that the financial institutions that do not merge soon, increase their size and obtain market share might be left in the cold. fourthly, it is believed that banks might become too small to compete effectively, except in niches, either in terms of products or geographically. in several countries, governments and regulators are urging banks to merge not because the merger would make them better, safer or more profitable, but because it would allow them to compete internationally with the main american and european banks. what governments and regulators should keep in mind is that, very often, the best way to create local banks that can compete internationally is to allow international banks to compete locally. fifthly, the choicest merger partners are taken up very rapidly. it is believed that if a bank does not act soon, it might be left with an unattractive merger partner. 6. disadvantages of bank mergers as long as barriers keep out international competitors, mergers may reduce competition and may hurt consumers. bigger banks are not necessarily safer than smaller ones. in a report published recently by the bank for international settlements, it is stated the current restructuring of the banking industry could cause constraints as competitive pressures interact with stubborn cost structures and heightened incentives for risk taking. this trend is especially dangerous since bigger banks are more likely considered to be “ too big to fail ”. the international movement towards the consolidation of banking systems has held promise for more efficient, better diversified banks, with more intense competition in local markets. in many cases, especially when acquirers paid a reasonable price and manage the resulting post - merger organisational problems effectively, this promise has certainly come true. there is, however, accumulating evidence in surveys and empirical research that the promise has not always been fulfilled for retail customers in local banking markets. in many cases, neither greater efficiency nor

gill marcus : issues for consideration in mergers and takeovers from a regulatory perspective speech by ms gill marcus, deputy governor of the south african reserve bank, at the institute for international research 9th annual conference held in johannesburg on 18 july 2000. * 1. * * introduction mergers and acquisitions in the financial services sector are receiving a great deal of attention at present. the trend is toward the blurring of the boundaries that separated the various parts of the financial sector, particularly commercial banking, investment banking and insurance. more recently, we have been faced with the prospect of the formation of large financial conglomerates. the ultimate objectives of a financial services institution whether it be a bank, insurance company or securities firm, are, firstly, to be financially safe and sound ; secondly, to obtain the confidence of and show fairness to the users of its financial services ; and, finally, to be efficient and effective. these objectives should always be consistent with the objectives of the regulatory authorities. the objectives of the regulator are to : • ensure a safe, sound and stable financial system. • enhance the confidence of and fairness to investors, by eliminating bad business practices and ensuring healthy competition between financial institutions. • ensure an efficient and effective financial system. it follows that the strategies adopted by banks as financial services institutions and the objectives set by the regulator have to be consistent with each other. the priorities assigned to the ultimate objectives of a bank may, however, differ from those of the regulator. for instance, the bank may have as its primary ultimate objective the maximisation of shareholder value, as measured by the rate of return on equity. this would be in conflict, however, with regulatory objectives if maximisation of shareholder value were to be achieved by the taking of excessive risks. the primary objective of the registrar of banks and, when applicable, the minister of finance, therefore, should be to ensure that a merger will not be detrimental to the public interest and also not contrary to the interests of the banks concerned, their depositors or their controlling companies. we must remember that the responsibility of the directors is to act in the best interest of their shareholders and, thereby, improve or maintain the wealth of their shareholders. the interest of the public and depositors is thus not the primary concern or responsibility of the directors. it is, therefore, imperative that the registrar of banks and the minister of finance protect the interest of depositors. our task, as regulators, is to ensure that, after a merger, acquisition, reconstruction or takeover, a