“Big 4” mergers unlikely

Westpac's CEO David Morgan says that the “four pillars policy” preventing Big Four bank mergers is “irrational”, in that it makes no sense that competition policy for banks should be different from any other sector. Banking is different, however, he said, and that's why there are prudential requirements and a regulator. But while Dr Morgan is critical of the four pillars policy, he admits that the poor community image of the banking industry has been a major factor in the policy's longevity. “We have ourselves to blame”, he said, “it's not because of concerns about competition and prudential policy, but image”. While banks have impressed shareholders with cost reductions, much of that has come about through branch closures and staff cuts.

Dr Morgan believes that the ACCC is unlikely to give the go-ahead to Big Four mergers due to growing pressure on politicians to protect their positions in marginal electorates. He says the problem is therefore with the Government, not the ACCC. The only way the four pillars policy might be reassessed would be if one of the banks got into distress or an offshore bank made a bid, he said.

The banking industry's competitive landscape will come under increased focus as speculation of a potential bid for St George Bank increases ahead of the expiry of its restrictive articles of association on July 1st this year.