Consolidation is becoming a common phenomenon in the modern banking industry for capitalizing on the advantages of huge size, diversifiying of loan portfolios to lessen the possibility of failure and harnessing core competencies. Cross-border capital flows, international financial integration and mergers are becoming synonymous with the globalization process. The process of consolidation decreases in the number of banks and increases the total assets held by the banking system. The takeover of the German bank, Bayerische Hypo-und Vereinsbank, by the Italian bank, Unicredito, in 2005, the entry of the US investment banks into Europe, or the presence of foreign banks in many emerging markets show that the banking industry is currently operating on a global scale. Financial institutions are monopolizing among the major multinational companies worldwide. However, cross-border mergers have been a minority trend, as compared to the number of domestic mergers.

The movement of banking consolidation was evolved by internationally diversified ownership of banks, which allowed international transactions, derivatives transactions and other forms of international investments. Both Europe and the US had a significant share in the cross-border bank mergers during the years 1996-2006, whereas Asia, Africa/Middle East, and Australasia showed a subdued performance during the same period. Also, the banks chose to acquire institutions within their continents in neighboring countries. According to UNCTAD's World Investment Report, banks from advanced market economies dominated the global banking industry mainly with their headquarters placed in the European Union or in the US. The uneven degree of internationalization of banks from different continents is also supported by a recent empirical study of Schoenmaker and Van Laecke (2007).

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