We live in a time when the necessity, desirability and inevitability of ever more bank mergers is simply taken for granted by bank executives, shareholders and regulators. The model of the ruthless cost-cutting merger, so firmly established in the US in the last seven years, has increasingly been adopted worldwide. As producing shareholder value becomes the prime motive of managers in national banking industries which for years have been overprotected by governments, overpopulated by too many unprofitable players, and inefficiently run, mergers - it is now taken for granted - are the only way to boost returns by cutting costs.
In the UK, it was NatWest's attempt to transform itself with a very different type of merger, one designed to boost revenues through selling Legal & General's savings and life insurance products through its branch network, that put it in play. Shareholders revolted. Bank of Scotland immediately pounced with its more orthodox proposals, promising shareholders to deliver cuts and efficiency to the larger bank's poorly managed cost base. NatWest might yet survive by disposing of non-core businesses in asset management, investment banking, private equity and overseas. But the feeling among UK bankers is that this bid has put the whole sector in play and the successful model remains Lloyds TSB, the UK's own version of the ruthless US cost-cutters.