The Swedish Competition Authority (SKE) believes that the merger of Arion bank and Kvika has served to increase the risk of harmful and tacit coordination, especially in the market for personal savings deposits.
This is among the things that appear in SKE’s summary of preliminary negotiations for the possible merger of the banks. The banks reported in April that the boards of the banks had dropped their plans for a merger.
The summary states that Kvika is an important competitive force in the market for personal savings deposits.
SKE’s preliminary assessment is that the merger would not only have caused considerable consolidation beyond competition law standards and a reduction in the number of viable competitors in the market for personal savings deposits, but the merger would also have led to Kvika, as an important competitive force, disappearing from the market for personal savings deposits.
“Thus, Kvika’s entry into the market has led to much more favorable interest rates on the market for personal savings deposits, thus bringing significant benefits to consumers. One manifestation of this has been that the difference between the Central Bank of Iceland’s policy interest rates and the banks’ deposit interest rates has decreased considerably and, among other things, Kvika has almost continuously offered the highest interest rates on non-restricted personal deposit accounts under the Auðar brand,” says the regulator’s summary.
Kvika has the ability and motivation
The summary also states that the conditions in this market are such that there is a greater risk of silent coordination in it than in various other markets. It is an oligopolistic market where three large competitors with a similar cost structure dominate the other competitors on the market.
Says that SKE’s initial assessment is that Kvika has the ability and motivation to disrupt a possible anti-competitive coordination in this market.
The inspection also examines other aspects in the summary, where it is stated, among other things, that the merger of Kvika and Arion would have led to great consolidation in the market for car and equipment loans, in the asset management market and in the field of stock and bond brokerage.
In addition, it says that according to SKE’s initial assessment, there are reasons to believe that a reduction from four to three powerful service providers in the market for currency brokerage would result in a significant distortion of competition in the relevant market.
“In summary, the Competition Authority’s assessment was that the proposed countermeasures by the banks were not sufficient to prevent the distortion of competition that resulted from the merger (…). Among other things, the Competition Authority’s initial assessment was that the countermeasures did not adequately address all aspects of the competition distortion that the Competition Authority had presented and discussed in meetings with the banks.”
Didn’t make a decision
As mentioned before, the merger of Arion and Kvika did not happen, but the banks reported in April that the boards of the banks had dropped their plans for a merger.
In an announcement from the Competition Authority, it is stated that since the banks ended the merger negotiations between themselves, the Competition Authority did not make and publish a decision on the said merger.
However, the inspectorate considers it important that the main primary results of the inspection are accessible, among other things to counter inequality of information about important government decisions.
