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Senate Maintains Stance On Ban On Big Four Banking Mergers
A Senate committee charged with looking at the Australian banking industry has issued a report which suggested that the Australian Government should maintain its Four Pillars policy, and not give approval for mergers proposed between the Big Four banking groups. The powerful Senate committee also suggested that parliament should intensify its scrutiny over competition in the retail banking market.
The Senate committee, known as the economics reference committee, recommended that a unit be assigned either from within the Treasury or the prudential regulator to oversee the compliance of conditions that have been attached to merger approvals, and levy fines on those lenders that fail to comply.
The 79 page report released on Wednesday included five policy initiative recommendations on all aspects of banking mergers, and examined the socio-economic impact of a number of recent controversial bank mergers, including last Octobers $2.1 billion acquisition of Bankwest by Commonwealth Bank, and Westpac’s $12 billion merger with St George.
The committee also looked at what measures were in place to ensure that the Westpac and St George merger complied with the conditions that were attached to its approval, and what should be in place for future bank mergers.
The report was also firm that Australia should remain committed to the current ban imposed on mergers between the Big Four banks.
The committee also said it would prefer that bank mergers to be completely regulated by the Australian Competition & Consumer Commission (ACCC) as with other industries.
“However, the committee is concerned that the (Trade Practices) Act sets such a high bar that the ACCC may not have grounds to prevent such a merger, which the committee would regard as not being in the national interest,” the report says.
Despite large concern with the broader industry in general, the report focused primarily on the retail banking market, and suggested that the ACCC, APRA and the RBA issue a joint annual report to parliament on competition within retail banking, cautioning that such a report should not increase the burden on financial institutions for reporting.
In granting approval for the Westpac St George merger, Federal Treasurer Wayne Swan imposed conditions such as maintenance of total branch and ATM numbers, and the abolition of foreign ATM fees.
The committee however noted that the only possible penalty for non compliance currently was the impractical option of rescinding approval of the merger and requiring it to be reversed.
However, the committee noted that the only penalty for non-compliance appeared to be rescinding approval for the takeover and a requirement for it to be reversed.
“This seems impractical, and too severe a penalty for many breaches,” the report says.
The report therefore recommended the creation of a new APRA or Treasury unit which would oversee compliance and have the ability to impose fines should an acquirer fail to meet its obligation.
The final policy initiative proposed by the report was for the ACCC to publish its commissioned research on proposed mergers in an effort to increase the level of transparency over the reasoning behind any of its decision.
The Australian Bankers Association an industry lobby stated that its initial view of the report was that it contained some “sensible” suggestions, including publication of non-confidential submissions on mergers.
“There are some recommendations which could increase the regulatory burden and compliance costs for banks, which might be passed on to customers in the form of higher costs for banking products and services,” ABA chief executive David Bell said.
“The ABA will examine these recommendations in more detail to assess whether the benefits outweigh the costs.”
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