Bank deregulation is better than mergers

The effects of mergers on bank costs, prices, profits, and market competition are compared with the effects from concurrent deregulation of branching restrictions. The title states our conclusion: deregulation has been better than mergers in Spain. Even so, improved post-deregulation economic conditions accounted for most of the improvement in costs and profits while deregulation had its greatest impact on improving competition. Analysis indicates that direct measures of market competition—rate spread, mark-up, and Lerner index—are more informative than the standard profit–structure relationship.