Four pillars policy

Last updated

The four pillars policy is an Australian Government policy to maintain the separation of the four largest banks in Australia by rejecting any merger or acquisition between the four major banks. [1] The policy, rather than formal regulation, first articulated in 1990, reflects the competitive concerns of more concentration as well as the broad political unpopularity of further bank mergers. A number of economically liberalist commentators have argued that the "four pillars" policy is built upon economic fallacies and works against Australia's better interests. [2]

Contents

The top four banking groups in Australia ranked by market capitalisation at share prices at 5 June 2021:

RankCompanyMarket capitalisation
(2021)		Cash earnings
(2021)		Total assets
(2021)
1 Commonwealth Bank $179.56 billion [3] $3.89 billion [4] $960.751 billion [5]
2 Westpac $97.22 billion [3] $3.44 billion [6] $901.329 billion [5]
3 National Australia Bank $89.46 billion [3] $1.65 billion [7] $766.063 billion [5]
4 Australia & New Zealand Banking Group $81.87 billion [3] $2.99 billion [8] $642.298 billion [8]

By market capitalisation, the Commonwealth Bank and Westpac are usually the two biggest companies on the Australian Securities Exchange and the big four banks make up a quarter of the ASX200. [9]

History

In 1990, the then Labor Treasurer Paul Keating adopted a policy, originally called "six pillars" — which covered the big four banks (Commonwealth Bank, Westpac, National Australia Bank, Australia & New Zealand Banking Group and two insurers (AMP and National Mutual) — that further mergers of these institutions would be rejected. It was articulated in the context of a proposed merger between ANZ and National Mutual. Keating believed this arrangement would ensure a competitive banking market. [10]

In 1997, leading business figure Stan Wallis [11] produced a report of his inquiry into Australia's financial system, entitled the Final Report of the Financial System Inquiry and commonly referred to as "the Wallis report." [12] Wallis recommended that the "Four Pillars" model be dismantled, to leave the banks subject to the same merger competition tests as other businesses. In response, the then Coalition Treasurer Peter Costello's removed the pillar status of the two insurers (National Mutual had by that time already been acquired by AXA), but the ban on mergers of the remaining four banks was retained, with the rider that none of them were considered immune from foreign takeover. [13] With the change of government, new Treasurer Wayne Swan stated in 2008 that the Labor government has no plans to dismantle the four pillars policy. [13]

The four pillars policy has not prevented the four major banks from acquiring smaller competitors. For example, in 2000, the Commonwealth Bank acquired the Colonial Group, which had emerged as a major bank–insurance combine in the 1990s, after the Colonial Mutual insurance group took over State Bank of New South Wales in 1994. The Commonwealth Bank also acquired the State Bank of Victoria in 1990 and Bankwest in 2008. Westpac acquired Challenge Bank in 1995, Bank of Melbourne in 1997, and St George Bank in 2008. [13]

In 2017, Peter Costello said that the advantage of having big banks under the four pillars policy was stability, which he attributed to Australia faring well during the GFC. [9]

Criticism

The policy has been criticised for being anti-competitive by ensuring that the four major banks are immune from takeover by the most likely suitors. At the same time, it is credited with insulating the banks from the global financial crisis of 2007–08. The major banks have criticised the policy on the basis that limiting the size of Australian banks makes them less internationally competitive. [14]

See also

Related Research Articles

Australian Securities Exchange Ltd (ASX) is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange. The ASX was formed on 1 April 1987, through incorporation under legislation of the Australian Parliament as an amalgamation of the six state securities exchanges, and merged with the Sydney Futures Exchange in 2006.

<span class="mw-page-title-main">National Australia Bank</span> Australian multinational bank

National Australia Bank is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers. NAB was ranked the world's 21st-largest bank measured by market capitalisation and 52nd-largest bank in the world as measured by total assets in 2019.

<span class="mw-page-title-main">Commonwealth Bank</span> Australian multinational bank

The Commonwealth Bank of Australia (CBA), or CommBank, is an Australian multinational bank with businesses across New Zealand, Asia, the United States, and the United Kingdom. It provides a variety of financial services, including retail, business and institutional banking, funds management, superannuation, insurance, investment, and broking services. The Commonwealth Bank is the largest Australian listed company on the Australian Securities Exchange as of August 2015, with brands including Bankwest, Colonial First State Investments, ASB Bank, Commonwealth Securities (CommSec) and Commonwealth Insurance (CommInsure). Its former constituent parts were the Commonwealth Trading Bank of Australia, the Commonwealth Savings Bank of Australia, and the Commonwealth Development Bank.

<span class="mw-page-title-main">ANZ Bank New Zealand</span> Retail bank in New Zealand

ANZ Bank New Zealand Limited is a New Zealand banking and financial services company, which operates as a subsidiary of Australia and New Zealand Banking Group Limited of Australia. ANZ is one of New Zealand's big four banks, and is the largest bank in New Zealand with approximately 30% of market share as of March 2021.

<span class="mw-page-title-main">BankSA</span> Australian bank

BankSA, formerly known as the Bank of South Australia, the State Bank of South Australia and the Savings Bank of South Australia is the largest bank in South Australia. It is a subsidiary of Westpac.

<span class="mw-page-title-main">ANZ (bank)</span> Australian multinational bank

The Australia and New Zealand Banking Group Limited (ANZ) is a multinational banking and financial services company headquartered in Melbourne, Victoria, Australia. It is Australia's second-largest bank by assets and fourth-largest bank by market capitalisation.

The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:

Banking in Australia is dominated by four major banks: Commonwealth Bank, Westpac, Australia & New Zealand Banking Group and National Australia Bank. There are several smaller banks with a presence throughout the country which includes Bendigo and Adelaide Bank, Suncorp Bank, and a large number of other financial institutions, such as credit unions, building societies and mutual banks, which provide limited banking-type services and are described as authorised deposit-taking institutions (ADIs). Many large foreign banks have a presence, but few have a retail banking presence. The central bank is the Reserve Bank of Australia (RBA). The Australian government’s Financial Claims Scheme (FCS) guarantees deposits up to $250,000 per account-holder per ADI in the event of the ADI failing.

Gail Kelly is a South African-born Australian businesswoman. In 2002, she became the first female CEO of a major Australian bank or top 15 company and in 2005 was the highest paid woman in an Australian corporation. She is the former chief executive officer (CEO) of Westpac, a role she held from 2008 to 2015. In 2010 Kelly was named 8th most powerful woman in the world by Forbes and as of 2014, she is listed in 56th place.

The Big Four is the colloquial name given to the four main banks in several countries where the banking industry is dominated by just four institutions and where the phrase has thus gained relevance. Some countries include more or fewer institutions in such rankings, leading to other names such as Big Three, Big Five, or Big Six.

The Bank of Papua New Guinea is the central bank of Papua New Guinea, which has a core mandate to ensure price stability and maintain macroeconomic growth. To achieve this, it discharges four main functions; 1. responsible for the formulation and implementation of monetary policy, 2. ensure financial system development and stability, 3. ensure the payment system remain efficient, and 4. provide a banking role to the Government. It also manages the country's foreign reserves, issue the country's currency, manages the gold and foreign exchange of Papua New Guinea.

Australia's insurance market can be divided into roughly three components: life insurance, general insurance and health insurance. These markets are fairly distinct, with most larger insurers focusing on only one type, although in recent times several of these companies have broadened their scope into more general financial services, and have faced competition from banks and subsidiaries of foreign financial conglomerates. With services such as disability insurance, income protection and even funeral insurance, these insurance giants are stepping in to fill the gap where people may have otherwise been in need of a personal or signature loan from their financial institution.

BSP Financial Group Limited (BSP) is the largest bank in Papua New Guinea, with 121 branches throughout the country and in 7 countries. BSP currently services over 650,000 business banking customers throughout the Pacific. As at 31 December 2022, BSP had total assets valued at K33.9 billion. Bank South Pacific is listed on the PNG Exchange Markets (PNGX) and, as of 25 May 2021, the Australian Securities Exchange (ASX).

The S&P/ASX 300, or simply, ASX 300, is a stock market index of Australian stocks listed on the Australian Securities Exchange (ASX). The index is market-capitalisation weighted, meaning each company included is in proportion to the indexes total market value, and float-adjusted, meaning the index only considers shares available to public investors.

<span class="mw-page-title-main">Westpac</span> Australian multinational bank

Westpac Banking Corporation, known simply as Westpac, is an Australian multinational banking and financial services company headquartered at Westpac Place in Sydney, New South Wales.

The Trust Bank of Tasmania was a state bank operating in Tasmania, Australia. It was founded in 1991 from the merger of the Tasmania Bank and Hobart Savings Bank/Savings Bank of Tasmania. It was sold to Colonial Mutual in 1999.

<span class="mw-page-title-main">Suncorp Bank</span> Agricultural Bank located in Queensland

Suncorp Bank is a part of the Suncorp Group, with head offices in Brisbane, Australia. From its beginnings in 1902 as the Queensland Agricultural Bank, Suncorp Bank has grown into the sixth largest bank in Australia.

This is a list of notable Australian companies operating in China, grouped by their Industry Classification Benchmark sector.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, also known as the Banking Royal Commission and the Hayne Royal Commission, was a royal commission established on 14 December 2017 by the Australian government pursuant to the Royal Commissions Act 1902 to inquire into and report on misconduct in the banking, superannuation, and financial services industry. The establishment of the commission followed revelations in the media of a culture of greed within several Australian financial institutions. A subsequent parliamentary inquiry recommended a royal commission, noting the lack of regulatory intervention by the relevant government authorities, and later revelations that financial institutions were involved in money laundering for drug syndicates, turned a blind eye to terrorism financing, and ignored statutory reporting responsibilities and impropriety in foreign exchange trading.

The Australian Banking Association (ABA), formerly the Australian Bankers' Association, is the trade association for the Australian banking industry. The ABA was founded in 1985 and is based in Sydney, New South Wales. The ABA represents twenty-two banks and associate members. It provides analysis, advice, and advocacy for the banking industry and contributes to the public policy development on banking and other financial services.

References

  1. ↑ "RELEASE OF THE REPORT OF THE FINANCIAL SYSTEM INQUIRY AND INITIAL GOVERNMENT RESPONSE ON MERGERS POLICY" (Press release).
  2. ↑ Marks, Bob; Young, Owen (22 August 2005). "Four pillars debate needs refining: AFR Economic Briefing". Archived from the original on 5 February 2008. Retrieved 24 January 2008.
  3. 1 2 3 4 "ASX Banks". Listcorp. Retrieved 5 June 2021.
  4. ↑ "cba-1h21-asx-announcement" (PDF). www.commbank.com.au. Retrieved 5 June 2021.
  5. 1 2 3 Monthly Authorised Deposit-taking Institution Statistics | APRA
  6. ↑ "Westpac_FY21_financial_results" (PDF). www.westpac.com.au. Retrieved 5 June 2021.
  7. ↑ "First Quarter Trading Update" (PDF). www.nab.com.au. Retrieved 5 June 2021.
  8. 1 2 "FY 21 Half Year Results Announcement" (PDF). www.anz.com. Retrieved 5 June 2021.
  9. 1 2 The Age, 26/07/2017, 'Are banker salaries really necessary?' - Peter Costello's challenge
  10. ↑ "Four pillars back on agenda". The Age . 14 May 2008.
  11. ↑ "Stan D. M. Wallis AC, BCom, Hon LLD, FCPA, FAIM, FCIM, FCIS". Amcor . Bloomberg . Retrieved 1 March 2018.[ dead link ]
  12. ↑ Financial System Inquiry (1997). Final Report of the Financial System Inquiry. Canberra, Australia. Archived from the original on 9 July 2014. Retrieved 13 July 2014.{{cite book}}: CS1 maint: location missing publisher (link)
  13. 1 2 3 "Westpac-St George merger won't topple four-pillars". The Age . 15 May 2008. Archived from the original on 15 May 2008. Retrieved 21 May 2008.
  14. ↑ Durie, John; Gluyas, Richard (3 March 2009). "Four Pillars policy, our shield against crisis". The Australian.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.