Abstract

Yitref Dinberu*

Bank mergers have become an important structural reform tool in emerging economies seeking to strengthen financial stability, improve competitiveness, and enhance macroeconomic performance. In Ethiopia, recent and proposed consolidations within the banking sector reflect broader financial sector reforms aimed at improving capital adequacy, operational efficiency, and resilience to economic shocks. This study examines the macroeconomic benefits and impacts of bank mergers in Ethiopia, focusing on financial stability, credit expansion, monetary policy transmission, market concentration, and economic growth. The analysis explores how consolidation may enhance economies of scale, strengthen risk management frameworks, and increase banks’ lending capacity to priority sectors such as agriculture, manufacturing, and infrastructure. At the macroeconomic level, bank mergers can contribute to improved financial intermediation, greater investor confidence, and enhanced integration into regional and global financial markets. However, potential risks including reduced competition, systemic concentration, short-term employment effects, and transitional financial instability are also considered. The study concludes that while bank mergers in Ethiopia can support long-term macroeconomic stability and growth, their success depends on effective regulatory oversight by the National Bank of Ethiopia, strong corporate governance, and a well-designed competition framework.