International Finance and Accounting Handbook

U.S. banks). Cross-border intra-European banking deals amounted to 25.8% of the
European total. The share of cross-border activity in the insurance sector has been
roughly twice that of banking, which possibly suggests somewhat different economic
pressures at work. With a few exceptions like HSBC and Citigroup globally, and For-
tis, Nordea, ABN AMRO, ING, BSCH, and BBVA as parts of regional or interre-
gional strategies, the aggressive development of cross-border platforms seems to be
the exception in the banking sector. In insurance, however, global initiatives by firms
like AXA, AIG, Zurich, AEGON, ING, Allianz, Generali, and GE Capital seem to be
a more important part of the M&A picture.
Industrial economics suggests that structural forms in any sector, or between sec-
tors, should follow the dictates of institutional comparative advantage. If there are
significant economies of scale that can be exploited, it will be reflected in firm size.
If there are significant economies of scope, either with respect to costs or revenues
(cross-selling), then that will be reflected in the range of activities in which the dom-
inant firms are engaged. If important linkages can be exploited across geographies or
client segments, then this too will be reflected in the breadth and geographic scope of
the most successful firms.
It seems clear, from a structural perspective, that a broad array of financial serv-
ices firms may perform one or more of the roles identified in Exhibit 2.1—commer-
cial banks, savings banks, postal savings institutions, savings cooperatives, credit
unions, securities firms (e.g., full-service firms and various kinds of specialists), mu-
tual funds, insurance companies, finance companies, finance subsidiaries of indus-
trial companies, and others. Members of each strategic group compete with each
other, as well as with members of other strategic groups. Assuming it is allowed to
do so, each organization elects to operate in one or more of the financial channels

2.4 CONSEQUENCES FOR GLOBAL INSTITUTIONAL COMPETITIVE ADVANTAGE 2 • 17

Exhibit 2.7. Worldwide Financial Services Merger Volume, 1986–2001.

59%

68%

61% 63%

78%

44%

24%

25%

28% 25%

18%

34%

17%

16% 3% 5% 8%

6% 4% 3% 5%

1% 4% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1986–1988 1989–1991 1992–1994 1995–1997 1998–1999 2000–2001

Banking Insurance Securities Asset Management

$36 bn $71 bn $66 bn $225 bn $671 bn $439. 2 bn