Both laws are in the process of being dismantled, though deregulation is not the immediate cause of this latest merger. Both Chase and Chemical are New York banks and they could have merged before. This is a marriage primarily driven by the need for cost-cutting. It carries with it all the usual starry-eyed rhetoric about the creation of a truly global financial services company, of course, but fundamentally this is a slash and burn merger designed to place Chase and Chemical at the forefront of efficiency in a world of ever-shrinking lending margins. Chase has also been under growing pressure from investors to do something about its lamentable record on shareholder value.
However, though there may be company- specific reasons for this get-together, it is also almost certainly a harbinger of things to come. There are about 11,000 state and regional banks in the US. Once deregulation is complete in two years, the numbers will begin to shrink. Analysts reckon that with each merger it may be possible to lop some 30 per cent off costs. Once the law allows it, the forces are therefore such that it will be hard not to merge; it is possible that we will see the emergence of a handful of powerful American behemoths.
Size is no guarantee of greatness or success, as the Japanese banks have proved. Nonetheless, the emergence of some American champions on the international stage plainly changes the banking landscape quite dramatically. If the cost-cutting benefits are as great as exponents claim, European banks will have to respond. Further mergers on a national basis are plainly pretty much barred. Lloyds was prevented from countering HSBC's bid for Midland even though, as Sir Brian Pitman, the Lloyds chief executive predicted at the time, the job losses and branch closures involved were going to happen anyway. The same sort of regulatory obstacles would probably obstruct other domestic merger propositions in Europe. As for a cross-border merger, the language and cultural differences involved would almost certainly wipe out any supposed benefit.
Possibly the best that Barclays and other British banks can hope for, therefore, is that the Americans cock up. There is slim chance of this happening, however. The merger of one regional bank with another, or of a commercial bank with a retail bank, should not be too difficult an exercise to undertake. And the prizes for doing so are likely to prove rich indeed.
Entrepreneur of old still alive and well
Who said the flashy1980s entrepreneur, fast living and fast dealing, died with the decade? A classic example of the breed is alive and well and thriving in Sheffield. Step forward, Stephen Hinchliffe, lover of fast cars, flyer of helicopters, shareholder in Sheffield United Football club and now an important force in British retailing.
After a hectic series of deals culminating in the purchase yesterday of more than 200 branches of Manfield and Freeman Hardy Willis, Mr Hinchliffe's recently formed Facia group is now the tenth-largest group of shops in Britain. It is a somewhat motley collection of other retailers' cast-offs, including Sock Shop, Salisbury luggage shops, Oakland menswear and the Contessa lingerie chain.Facia is at present a private company, so if this gluttonous appetite for growth is cause for concern it is, for the moment, none of our business.
Like so many financiers before him, however, Mr Hinchliffe is hungry for the wealth, prestige and access to capital that a stock market quote would give him. If he goes that route, he will have to answer some tough questions. What, apart from the man himself, is the glue that sticks this disparate group of retailing interests together? And then there is the man himself, whose chequered past would normally act like a warning beacon to City investors. Businesses that expand at this kind of break-neck pace normally go horribly wrong. High street experts and potential investors will be watching his progress with more than casual interest.
Meeting the German model in the middle
There was the usual hankering after the German way of doing things yesterday as Malcolm Bruce, the Liberal Democrat Treasury spokesman, introduced the party's new economic policy document. No more was this more apparent than in the advocacy of "stakeholder capitalism", for which Germany is a role model.
The party wants a new system of corporate governance to increase shareholder commitment and combat the culture of short-termism. The new structure would be oriented towards employees, customers and the community, as well as managers and shareholders. All worthy stuff, but as the OECD's report on Germany, also published yesterday, reveals, hardly supported by the evidence. According to the OECD, there is no clear link between corporate governance structures and investment horizons.Like motherhood and apple pie, everyone believes in long-term shareholder commitment. Yet long- termism, too, has its price if unwarranted loyalty cossets companies and encourages feather-bedding.
The goal must be to strike a balance between the incentives for change and restructuring that come from the Anglo-Saxon model and the incentives for persistence and strategic thinking that come from the German model. As the OECD points out, the German model is itself moving towards the Anglo-Saxon one under international pressure. That is where we should seek to meet it.
Running ahead of the hounds
The amount of money riding on whether the three bids for regional electricity companies are referred to the Monopolies and Mergers Commission grows larger by the day. But if we don't yet know which way Ian Lang, Secretary of State for trade and industry, will jump, we know what one of his ministers thinks. While a humble back-bencher, the luckless Richard Page was the only Tory to sign a Labour early-day motion calling on the Government to refer any bid for an electricity company and to review the "total failure" of regulators to safeguard customers' interests. Mr Page is now Parliamentary Under-Secretary of State for Industry and Energy. Oh, dear.Reuse content