Fleet-BankBoston merger to impact students

PATRICK MCGARVEY/YH CASHING IN: The recent merger of Fleet and BankBoston could lead to better everyday banking services for Yale students.

Phil Mann, ES '01, is not one of Fleet Bank's biggest fans. Last year, he was frustrated by the bank's ATM shuffling and high service fees, and took his money elsewhere. But a recent merger deal between Fleet and BankBoston might force him to consider his switch.

Fleet Financial Group and BankBoston recently jumped on bank merger bandwagon, announcing on Sun., Mar. 14, that they will join forces in a $16 billion deal. The union between two of New England's largest banks will create the eighth-biggest bank in the U.S. and the largest bank in the Northeast. The new company, Fleet Boston Corp., will be based in Boston.

Both companies touted the benefits of the merger to customers. "[The deal] ensures the presence of a locally based bank that is willing to invest and provide resources that will ensure progressive banking in the community," Fleet spo-kesman Jim Schepker said. He emphasized the local roots of both Fleet and BankBoston as assurances that the bank would remain responsive to the needs of consumers throughout New England. He added that campus ATMs should remain under the same ownership following the merger.

Paul W. MacAvoy, GRD '60, Williams Brothers Professor of Management Studies at the Yale School of Management, said that the merger could improve some bank functions. "[There may be] lower service charges due to new cost efficiencies, more
ATMs, and faster processing of monthly bank statements."

Yet MacAvoy is somewhat more skeptical about the overall consumer benefits of the merger. MacAvoy served on the board of directors of Chase Manhattan Bank when it merged with Chemical Bank. He emphasized that such bank mergers are "efficiency- and cost-driven" and that the banks' motives for merging are based more on economies of scale and wholesale gains--profit maximizing--than on improving retail service. "[A bigger bank] becomes more automated, centralized, where individual arrangements at local branches
are secondary," he said. "The days
of counter service with a human touch are long gone."

The new bank will probably be required by regulators to sell a number of branches throughout New England in order to safeguard against a Fleet-BankBoston monopoly before the merger is approved. With BankBoston and Fleet branches virtually side by side in downtown New Haven at Church and Chapel Streets, one branch will almost certainly be sold.

MacAvoy believes that the void left by branch sales and closings will be filled by one of the nation's other major banks, and that a major bank, not a community bank, is more likely to open in New Haven in place of the old Fleet/BankBoston branch. He predicted
that only three-quarters of the current market will be filled by a new entrant. In
such a situation, "where the number of branches declines, there will be lower quality of service."

Despite Fleet and BankBoston's enthusiasm for the merger, MacAvoy explained that the benefit of the merger to consumers will be marginal, and the effect on customers could be limited to simple bank functions. In addition to branch closings, in the New Haven community, the merger may result in significant job cuts and layoffs as the newly formed company attempts to streamline. BankBoston CEO Chad Gifford recently estimated that at least 5,000 jobs out of a combined workforce of 59,000 will be eliminated in New England as the companies merge. But according to Schepker, most of the two banks' staffs in New Haven are branch workers and that branch staff would either be retained or be given jobs
with whatever new bank opens in the old
branch's place.

The merger deal is expected to close
in the fourth quarter of 1999. "In the near term, no changes are taking place," Schepker said. "It is banking as usual."

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