KATHMANDU: As global finance undergoes transition, two countries Nepal and the United Kingdom are generating headlines for how they are restructuring their financial systems. While both countries are welcoming consolidation, their reasons and approaches tell two very different tales about economic change.

In Nepal, bank mergers are being guided by regulatory reform. The Nepal Rastra Bank (NRB), the country’s central bank, has led a massive push to decrease the number of financial institutions through compulsory and incentivised consolidations. The objective is to build a more robust and efficient banking industry that can withstand economic shocks and provide financial services to neglected areas.

The financial environment of Nepal has seen substantial changes in recent years because of this strategy. Larger organisations have acquired smaller regional banks, which has enhanced governance and capital adequacy but also raises concerns about local access and job relocation.

In the meantime, a very different form of consolidation is taking place in the UK. Here, rivalry, digital disruption, and the demand for scale are the main market drivers for mergers and acquisitions. To stay ahead in a market characterised by artificial intelligence, cybersecurity, and regulatory complexity, traditional banks, fintech competitors, and even international investors are seeking strategic collaborations.

 Post-Brexit reality and continued global instability have fuelled the UK’s desire for technical innovation and international competitiveness. In London’s financial area, mergers are more about acquiring a competitive advantage in a fast-digitising market. Many banks are partnering with fintech entrepreneurs or purchasing competitors to diversify portfolios and save operating expenses.

Despite their opposing methods, Nepal and the United Kingdom are grappling with similar questions: what does consolidation imply for consumers? Will it result in more access and innovation, or diminished choice and centralisation? And how can financial systems remain secure and inclusive?

In today’s unstable global economy, bank mergers are more than just corporate move; they are strategic decisions with national ramifications.

For Nepal, they represent a road towards stability and outreach. For the UK, they represent a gamble on efficiency and global relevance.

Over the last decade, Nepal’s financial industry has seen tremendous mergers and acquisition, with over 150 mergers of commercial banks, development banks, finance companies, and microfinance bank. The merger movement began as a policy response to systemic fragmentation and inefficiencies in the banking industry but has now expanded into a key vehicle for structural transformation. The consolidation has greatly decreased the number of financial institutions functioning in the nation. Nepal had 27 commercial banks in 2016, but that number has dropped to 20 by mid-2025. Development banks have declined even more dramatically, from 76 in 2016 to 17 now. Finance companies, which formerly numbered over 50, have been cut to 17, while the number of regulated microfinance institutions has decreased from over 90 to around 52 during the same period.

Conversely, the UK banking industry has been significantly influenced by strategic consolidation, especially following the 2008 global financial crisis. Prominent British banks such as Lloyds, Royal Bank of Scotland, HSBC, and Barclays have undergone expansion, contraction, or transformation via a succession of notable mergers and acquisitions, both inside the UK and beyond.

Nepal’s Mergers: A Regulatory Engine

Nepal’s progression towards banking consolidation has been influenced by regulatory measures and market-oriented policies, especially in the last two decades. The process started incrementally, with first voluntary mergers, including the 2013 merger of NIC Bank and Bank of Asia Nepal, resulting in the establishment of NIC Asia Bank.

 This significant agreement marked Nepal’s inaugural substantial merger between two commercial banks and established a precedent for further mergers. Prabhu Bank was established via the merger of Kist Bank and other financial institutions, enabling its transformation into a comprehensive commercial bank with an extensive retail and remittance foundation.

In 2016, the Nepal Rastra Bank (NRB) expedited consolidation by enforcing a policy that required a minimum paid-up capital of Rs. 8 billion for commercial banks, Rs. 2.5 billion for development banks, and Rs. 800 million for finance companies.

This regulatory momentum compelled several banks and financial organisations to consolidate, either willingly or due to market pressures.

A significant outcome of this trend was the 2020 merger of Global IME Bank and Janata Bank, succeeded in 2022 by Global IME’s acquisition of Bank of Kathmandu. These agreements elevated Global IME to the status of one of Nepal’s major commercial banks, in terms of assets and branch network.

Nabil Bank also played a significant role in the consolidation process. In 2021, it acquired United Finance Limited, therefore enabling diversification into leasing and hire purchase, so achieving vertical integration within the financial services industry. In the year 2022, Nabil Bank also acquired Bangladesh Bank Limited fortifying its balance sheet, augmenting its branch network, and boosting its client base.

In 2023, Nepal Investment Bank and Mega Bank Nepal Ltd merged to form Nepal Investment Mega Bank, uniting their expertise in corporate banking, SME financing, and digital infrastructure.

Numerous significant mergers occurred during this timeframe. In 2023, Prabhu Bank merged Century Commercial Bank to augment its market presence and retail proficiency. Kumari Bank merged with Nepal Credit and Commerce (NCC) Bank in the same year, intending to become a more competitive entity adept at integrating new technology. In 2023, Himalayan Bank acquired Civil Bank, consolidating their operations to enhance size and efficiency throughout their integrated network.

The UK Bank Merger Model: Strategic and Market-Led

In contrast to Nepal’s regulatory-driven consolidation, the banking mergers in the United Kingdom have predominantly been influenced by corporate strategy, competitive positioning, and responses to financial crises.

In the last three decades, UK banks have engaged in mergers and acquisitions to increase market share, diversify product lines, penetrate new markets, and address systemic issues. The 2009 merger of Lloyds TSB with Halifax and Bank of Scotland (HBOS) during the global financial crisis resulted in the establishment of Lloyds Banking Group, necessitating a £20 billion government bailout and subsequent substantial restructuring, including the spin-off of branches to form the new TSB Bank.

Likewise, the Royal Bank of Scotland’s acquisition of NatWest Bank in 2000 established one of the largest banking companies globally at the time, although it subsequently encountered financial difficulties and partly government control.

Barclays Bank’s acquisition of Lehman Brothers’ UK operations in 2008 enhanced its global investment banking business, evolving it into a dual-strength institution with an expanded risk profile.

HSBC’s acquisition of Midland Bank in 1992 signified its foray into UK retail banking, transforming the Hong Kong-based bank into a prominent UK institution.

 Spanish giant Santander Bank significantly influenced the UK market with swift acquisitions, commencing with Abbey National in 2004, followed by Alliance & Leicester and Bradford & Bingley in 2008, so establishing itself as a prominent entity in British retail banking within a short span.

Shared Lessons Amid Divergence

In an era of technological disruption and worldwide economic instability, the divergent merger policies of Nepal and the United Kingdom provide significant insights. Nepal’s regulatory environment has expedited structural changes and diminished institutional fragmentation, yet it highlights the necessity for effective post-merger human resources integration, uniform operating protocols, and transparent communication with stakeholders.

In contrast, the UK’s market-driven strategy emphasises strategic alignment, cultural compatibility, and technology preparedness, leading to more robust institutions but also exposing issues with complexity, service continuity, and customer retention.

Ultimately, both examples demonstrate that the success of bank mergers is decided not by the method alone, whether regulated or market-driven, but by the quality of execution.

 Sustainable consolidation necessitates thorough planning, excellent governance, and an unwavering emphasis on long-term stability and consumer trust. As global banking evolves, the shared lessons from Nepal and the United Kingdom remain critical for developing robust financial institutions.

(The author possesses over 17 years of experience in Nepal’s banking sector, along with international exposure in a UK-based bank. He is currently a Doctoral Scholar at the University of Gloucestershire and works with Lloyds Banking Group in the United Kingdom.)