Adair Turner, the chairman of the Financial Services Authority, Britain’s equivalent of the Securities and Exchange Commission, says his agency may ask the British government for power to block hostile takeovers in the banking sector.  “Aggressive, contested” acquisitions of banks can upset financial stability, he said in an interview on Thursday with Dow Jones Newswires.  A tough stand by a financial regulator? Hardly. Mr. Turner’s proposal appears to be driven more by hype than by hard necessity.  For hostile bank deals are rare, accounting for a small slice of bank mergers over all. Between 2001 and 2010, there were but seven hostile bank deals totaling $104.6 billion in value, compared with $2.1 trillion in global bank takeovers over all, according to Thomson Reuters, which tracks corporate finance activity.  Banks prefer friendly deals so they can make exhaustive reviews of target’s books. And some of the most important assets of a bank are its people — with a hostile takeover, there’s a high risk they will leave.  Moreover, “the incentives to do a hostile deal for a financial institution are already low because of the necessary regulatory clearances,’’ said Peter Hahn, a lecturer in finance at the Cass Business School at the City University of London. While a special adviser to the F.S.A. on banking, Mr. Hahn said he was not speaking in that capacity.  Still, the biggest bank deal of late — and the obvious trigger for Mr. Turner’s views on hostile bank deals– was the Royal Bank of Scotland-led consortium’s acquisition of ABN Amro of the Netherlands for $98.2 billion just as the credit squeeze took hold.  During the financial crisis, the British government was forced to pump billions of pounds into Royal Bank of Scotland after it posted a net loss for 2008 of £24.05 billion , the biggest in British corporate history.  All the other hostile bank deals over the past decade were far smaller than the R.B.S.-ABN Amro merger.  Mr. Hahn noted that banks seeking to merge had long been required to make assurances to regulators on a number of fronts, including capital adequacy of the merged entity and concentration of risk in the combined bank.  “Should regulators rule on capital adequacy structures before acquisitions are completed?’’ he asked. “That seems perfectly proper to me. It would be insane not to.’’
Britain's bank regulator wants the authority to block hostile takeovers. But given the rarity of such events in banking, is the power really needed?