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Bank merger to give opportunity to debtors?

by endroar
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The stock market in Bangladesh is very weak and the capacity of people involved in it is also questionable. In this situation, the contribution of the banking sector for investment and liquidity in business is undeniable. Apart from that, banks provide various business advice to their customers.

Hence, if competition is not preserved in the banking sector as one of the driving forces of the economy, the potential for loss of investors remains. In this situation, if a small number of banks are allowed to control the market through bank merger, the economy may be damaged.

The opportunity for a small number of banks to control the market due to bank acquisitions may lead to increased aggressive behavior among the acquiring bank managers. According to the theory of concentration-fragility, this aggressive behavior causes banks to increase their lending rates, thereby dissuading good customers or low-risk customers from taking loans, and more loans go to high-risk customers. As a result, the default risk of the acquiring banks increases.

If we add to this economic theory the ongoing lack of good governance of the banking sector, the bad debt situation of the banking sector in the post-merger period is likely to worsen.


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