Megabanks. The very word conjures up a futuristic world of huge, complex-and dominant-financial institutions.

The emergence of the megabanks has been spurred by the rapid deregulation of financial services, by the desire to improve efficiencies, by the quest to diversify and expand revenue sources, and by eagerness to cross-sell established products to newly acquired customers.

Executives of the megabanks foresee unparalleled opportunities for business expansion. But the mergers also raise questions whether the sought-after synergies are achievable and whether such large organizations are manageable.

This supplement explores the implications of consolidation and the related phenomenon of convergence, the bringing together of banking, investments, and insurance services under one corporate roof. Both the opportunities and the risks are explored in detail.

The emerging Citigroup, resulting from the proposed merger of Citicorp and Travelers Group, is the most dramatic recent example of convergence. Both the available opportunities and the perils likely to be encountered are examined in an article on page 4A.

One of the big risks, of course, is that the public simply won't buy the concept of one-stop shopping for financial services, preferring instead to pick and choose among products from a variety of companies. As one consumer put it, "I don't know how interested they are going to be in me." The public's attitude is explored in a series of interviews beginning on page 6A.

While convergence is new to the United States, "universal" banks have long been established in Europe, where there are few barriers to such institutions. But, as an article on page 10A makes clear the European models have failed to achieve the level of profitability that is enjoyed by the major banking companies in the United States.

Very large and complex companies raise problems of organizational design. Can two share the top job? Is a large organization manageable at all? "I think to run an organization, particularly one the size of Citigroup, one person can't do it alone," said one consultant. These and other ideas are explored in an article on page 3A.

And finally, Robert Parry, president and chief executive of the Federal Reserve Bank of San Francisco, says, "We are seeing in the case for convergence that there is a blurring of the distinctions among the different types of financial institutions. But Congress has been well behind the times." He shares on page 8A his thoughts about the need for regulatory reform as new forms of organization develop.

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