What Is the Definition of Bank Consolidation?

Bank consolidation occurs when two or more banks become one bank. According to American Banker, this happens through either a takeover by a bank or via a mutual merger between two or more banks.

Bank consolidation can lead to expansion for the newly merged institution. American Bankers states that banks consolidate for multiple reasons, including to mitigate competition, gain capital power both domestically and internationally, to compete with larger banking institutions or to expand the services that the newly merged bank can provide both internally and geographically by decreasing overall operating costs. For example, in 2008, Washington Mutual was purchased by JPMorgan Chase, and it is not managed as a part of JPMorgan Chase.