What's going on?

French multinational bank Soci�t� G�n�rale said on Monday that it�d reached an agreement with US authorities to settle investigations into its wrongdoing � potentially clearing the stage for a merger with Italy�s largest bank, Unicredit.

What does this mean?

Soci�t� G�n�rale was being investigated for bribery and manipulation of the London interbank offered rate (a.k.a. LIBOR) � the interest rate that banks agree to charge each other for short-term loans. The bank hasn�t said how much it�s had to pay in the settlement (some think it was as much as $1 billion) but it�s paid from an almost-$3 billion pot of money that was put to the side especially for this purpose.

With the investigation cloud no longer hanging over the company, a merger with Unicredit may be on the cards � that�s according to the Italian bank�s CEO, who�s been considering it for several months.

Why should I care?

For markets: Investors love certainty.

Soci�t� G�n�rale�s stock was up by 1% on Monday. Investors are likely pleased the investigations are over � and that costs are finite and certain, even if undisclosed. However, shares in Unicredit fell by 1%. Its investors might be worried by the potential uncertainty of a merger � regulators would likely have to sign off on any deal, and the complexities of combining two large companies could prove a stumbling block to any revenue boost or cost savings (a.k.a. synergies) both companies would hope to achieve.

The bigger picture: Banks are bulking up.

According to reports in May, British bank Barclays was considering an approach for rival Standard Chartered. Then on Monday, the UK�s Clydesdale and Yorkshire Bank Group improved its acquisition offer to shareholders of Virgin Money. Some European banks are under pressure to get bigger via mergers or acquisitions in a bid to be more competitive on the global stage � a number have struggled to grow profits while their US competitors have made hay in areas like trading stocks and bonds.