Application of the “probable future competition” doctrine to the commercial banking and savings and loan industries

Conclusions This study identified two implicit assumptions inherent in the use of the probable future competition (PFC) doctrine by regulators in the commercial banking and savings and loan industries. One assumption was that an institution's merger request identified it as the most likely entrant (MLE). The other assumption was that the higher the likelihood that a merger requestor would enterde novo the more important it is to deny its merger request so as to maintain the over all probability of entry.Both of these implicit assumptions were shown to be tenuous. In all cases where PFC was the issue, it was demonstrated that there was no logical reason for regulators to presume that a merger request signaled an MLE. Also, it was shown that in some quite reasonable situations merger approval is less harmful to the probability of at least onede novo entrant the higher is the merger requestor's individual likelihood of entry.