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W O R K I N G PA P E R S E R I E S

WORKING PAPER NO. 292

BANK MERGERS, COMPETITION

AND LIQUIDITY

BY ELENA CARLETTI,

PHILIPP HARTMANN AND

GIANCARLO SPAGNOLO

November 2003

EUROPEAN

CENTRAL

BANK

W O R K I N G PA P E R S E R I E S

WORKING PAPER NO. 292

BANK MERGERS, COMPETITION

AND LIQUIDITY1

BY ELENA CARLETTI2,

PHILIPP HARTMANN3 AND

GIANCARLO SPAGNOLO4

November 2003

1

2

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We would like to thank Franklin Allen, Giuseppe Bertola, Ulrich Bindseil, Urs Birchler, Jürg Blum,Vittoria Cerasi, Hans Degryse, Fiorella De Fiore, Charles Goodhart, Martin Hellwig,

Cornelia Holthausen, Haizhou Huang, Roman Inderst, Andreas Irmen, Simone Manganelli, Bruno Parigi, Rafael Repullo, Jean-Charles Rochet, Richard Rosen, Martin Ruckes, Rune

Stenbacka and Jürgen Weigand for comments and suggestions.Thanks also to the participants at the Fed Chicago Bank Structure Conference 2003, the Launching Worskhop of the

ECB-CFS network in Frankfurt, the Third Joint Central Bank Conference in Basel, the CEPR/Fundación BBVA conference on universal banking in Madrid, EFA 2002 in Berlin, EEA and

ESEM 2002 in Venice, GFA 2002 in Cologne, ESSFM 2002 in Gerzensee; and to seminar participants at the Bank of England, ECB, Ente Enaudi, EUI, Fed Board, New York Fed,

George Washington University, IMF, Swiss National Bank, University Carlos III, and University of Zurich.We appreciated the excellent research assistance by Andres Manzanares and

Sandrine Corvoisier. Any views expressed are only the authors´ own and do not necessarily coincide with the views of the ECB or the Eurosystem.This paper can be downloaded

without charge from http://www.ecb.int or from the Social Science Research Network electronic library at http://ssrn.com/abstract_id=487471.

University of Mannheim, Department of Economics, 68131 Mannheim, Germany, email: carletti@rumms.uni-mannheim.de....