Inner City Press -- Investigative Reporting From the Inner City to Wall Street to the United Nations

IMF Promotes Bank Mergers, Says Bigger is Better, Politics & Portugal Dodged

By Matthew Russell Lee

WASHINGTON DC, April 15 -- The International Monetary Fund is unabashedly promoting the takeover of small banks by large ones, claiming that its own work in “Emerging Europe” since the financial meltdown shows that communities are better served by large banks, even if based far away or in other countries.

  IMF European Department Director Antonio Borges told reporters on Friday that Belgium was smart to have pushed Fortis to being acquired by BNP Paribas. He urged more such mergers.

  Inner City Press asked Borges if the IMF proposed any safeguards at all, given that concerns exist that when a local bank is acquired by one based far away, there will be less reinvestment and accountability.

  Borges, while calling this an “interesting question,” bragged that the IMF organized a coordinated effort to get large banks to treat communities, particularly in Emerging Europe, fairly, and that this had worked. See IMF transcript, below.

Borges, invisible hand and safeguards on mergers not shown

  Inner City Press began to ask about attempts to encourage or require reinvestment, for example in the UK -- but moderator Simonetta Nardin said there was no time for follow up questions.

  Meanwhile, Borges took but refused to answer two questions about Portugal, citing an IMF policy against officials working on their own countries, and also claiming that the IMF does not get involved in politics. What -- encouraging bank mergers is not political? Watch this site.

From the IMF's transcript:

Inner City Press: you seem to be saying that bank mergers—small banks being bought by big ones sort of unqualifiedly may be a good thing. In some countries people think that local banks are more accountable, that if you move the assets to a faraway headquarters that there's less responsive. What do you say to that critique and is that something that the IMF takes any account of?

MR. BORGES: you ask a very interesting question, because this is a problem we were faced with over the last few years. In many of the countries of emerging Europe, you find banks that actually are owned by other banks elsewhere and there were concerns that, as there might be problems in the domestic countries of those banks that assets would be pulled out from emerging Europe and they might suffer. And the Fund, the IMF, invested quite a bit of effort to organize a coordinated effort on the part of all these banks to behave in the best possible interests of those economies, and I must say this was quite successful, because as a result, these countries are now recovering very well and their banks are operating well. So, if anything, the experience of emerging Europe demonstrates that having large, solid banks operate in your country may be an important source of stability if things are properly managed.