Many yards of press coverage have been devoted to the matter in the interval. But the truth is the question before the minister has never been whether to accept or reject the mergers outright, as a straight up-or-down proposition. In all likelihood, the mergers are heading for exactly the same resolution as they have been from the start -- approval, with certain provisos.

Certainly we are entitled to discount the latest rumours, spread by the Toronto Dominion bank, to the effect that the mergers are dead, period. Given TD's obvious discomfort at being stuck with the Canadian Imperial Bank of Commerce, a most unattractive marriage partner, it is hardly surprising to find the bank hinting loudly that the feds might stop the wedding.

Neither should we be too excited by the previous week's revelation, that the finance minister would soon reject the mergers as proposed, but would entertain rejigged proposals in the new year. As a matter of logic, "no, but" is indistinguishable from "yes, but." To say you will not accept the mergers unless certain conditions are met is the same as saying you will accept the mergers if those same conditions apply.

As a matter of policy, moreover, this is precisely the answer the feds should be giving.

The question that should be uppermost in the minister's mind is not whether or not to approve the mergers, but how to ensure the most competitive market for financial services. On the face of it, shrinking the Big Six down to the Big Four would seem to mean less competition for consumers' dollars, particularly in some market segments, as the Competition Bureau is likely to rule. But allowing the banks to merge -- on certain conditions -- might well result in a more competitive industrial structure than if the mergers were simply turned down flat.

It all depends on the conditions. There are two ways to go. One arrangement, the sort that appeals to many politicians, would allow the banks to merge, but forbid them to realize any savings from it: No branches closed, no jobs lost, indeed very little change of any kind. In such a scenario, the gains to the banks from merging are strictly owing to greater market power, allowing them to charge higher prices than they could under more open competition.

The deal is typically further sweetened by the promise of certain favours to politically powerful interest groups, e.g. easier loans to small business. So rather than a competitive, efficient industry, the mergers would result in the banks and the interest groups dividing the monopoly profits extracted from consumers.

The other sort of merger conditions would allow the banks to rationalize their operations, but would give competition freer play to ensure the savings are passed on to consumers.

Some of these changes would be desirable in their own right, with or without the mergers: for example, eliminating whatever legal or technical barriers remain to foreign banks entering the Canadian market, or opening access to the payments system to non- bank intermediaries such as insurance companies.

But others would hinge on the mergers themselves. The Senate banking committee, for example, recommends that the merging banks be forced to sell part of their branch networks. The banks themselves would be only too willing to do this, given the costs of keeping many of these branches open. But what might be a drag on the earnings of the Big Six could be a market-opening opportunity in the hands of a Western Canadian or Hong Kong Bank.

On these terms, everybody wins. The big banks can bulk up to competitive weight in those sectors, such as credit cards and electronic banking, where they are most vulnerable to foreign invasion, while shedding themselves of unwanted fat in more traditional banking fields. Their smaller domestic and foreign competitors get a chance to step up to the big leagues. And consumers get more choice and lower prices across the board.

Now, which set of conditions do you think the government will choose?