We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger changes the … distribution of bank sizes and aggregate liquidity needs. Mergers among large banks tend to increase aggregate liquidity needs and … thus the public provision of liquidity through monetary operations of the central bank. …

stock prices of non-financial firms. Bank targets become more profitable and larger, while those of non-financial firms … remain mostly unaffected. A major determinant of the positive bank returns is the degree of opaqueness that characterizes the … institutional setup for supervisory bank merger reviews. The legal design of the supervisory control of bank mergers may therefore …