Bank Regulation Level as an Incentive for Cross-Border Mergers and Acquisitions in Banking Sector

The process of internationalization and consolidation in the banking sector began in the mid-1980s and quickly developed all over the world . The important part of this process were cross-border mergers and acquisitions. They allowed banks to diversify country-specific risks, to gain access to new markets and to improve their efficiency and profitability. Over the past 30 years, the number of transactions reached its maximum of 24% of the total number of mergers and acquisitions in 2006. After that, as a result of the financial crisis, the trend was replaced by a declining one. In this paper, I described in details the history and trends of international banking transactions, the determinants and drivers of mergers and acquisitions, as well as the institutional environment and regulatory supervision. The research in this paper is connected with testing the hypothesis of banks' incentives to "run away" from regulation in their own country by taking over another bank. The constructed model considered the correlation between relative volume of cross-border M&A deals and the difference in the level of banking supervision on the basis of data on transactions around the world in the period from 1995 to 2016. The results of the study confirmed the assumption, that is, the widening gap between the strict regulation in the acquirer country and the target country increases the banking interaction, expressed in the relative number of mergers and acquisitions between countries. This conclusion can be used in assessing the need for additional supervision of transnational banking activities and the creation of special regulatory institutions.