The Competition and Fair Trading Commission (CFTC) has given a green light to the merger between Malawi Savings Bank (MSB) and FDH Bank, creating the country’s third largest bank.
The move follows months of investigations by the commission which found that the merger of the two banks will not diminish competition in the banking sector.
CFTC’s nod to the merger also comes eight months after government resolved to sell 75 percent of its shares in MSB to FDH Holdings for K9.5 billion.
In a statement released Wednesday and signed by CFTC executive director Charlotte Wezi Malonda, the commission resolved to approve the FDH-MSB merger after establishing that the move would have a positive effect on the country’s banking sector.
“The banking industry is dominated by two big banks which have a market share of about 25% each. The rest of the banks have individual market shares of less than 10%. The merged entity between FDH Bank and MSB would have a market share of about 15%, making it the third largest bank in Malawi. This will likely ease the dominance by the two big banks which would be a positive competitive attribute,” said the commission.
However, CFTC says the merger has been approved on the condition that the parties involved will not abuse the increase in market power that the merged bank will acquire and that they will not close any branch of MSB and FDH Bank.
CFTC has also moved to protect employees of the two banks should the merged bank find it necessary to cut staff.
“In line with the sales purchase agreement, the parties maintain the existing MSB staff at the same or improved terms and condition of service and should there be need for retrenchment, all redundancy and termination costs shall be paid accordingly,” CFTC said.
The commission is in the near future expected to sign a Memorandum of Undertaking with the banks once they agree to the conditions.