The Four Australian Pillars

Every so often one of the CEOs of the four big Australian banks takes a swipe at the Australian Government’s long-standing ‘four pillars’ policy. The ‘four pillars’ policy essentially says that the four big strategically important banks in Australia, ANZ (which also owns National Bank New Zealand), Westpac, National Australia Bank (which owns BNZ) and Commonwealth Bank (which owns ASB) are so important to the Australian economy that they need to remain separate companies. They are not allowed to merge, buy each other out or all be bought out by the same overseas buyer. The reasoning is that if one bank collapses then the other three pillars will still be left standing, and not so badly affected as they would be if they were all under the same umbrella.

The four banks have had a long held grudge against this policy, which limits their ability to continue the pattern of takeovers and mergers that has occurred in the last twenty years.

In the latest criticism of the four pillars policy, Westpac CEO, Dave Morgan, told The Australian newspaper “As technology becomes more and more pervasive in banking and the spends you need become larger and larger and as margins contract, the imperatives for scale become larger.

“Consolidation has not yet run its course in this country.”

This debate is an interesting one for New Zealand, because Australia’s four pillars policy is a de facto policy in New Zealand. We also have four large strategically important banks, currently each owned by one of the four Australian pillars. If the four pillars policy were to end in Australia it would open the way for further mergers and takeovers among New Zealand banks as well.

Soon New Zealanders may need to decide if we want to have our own ‘four pillars’ policy. If Australia responds to the political lobbying of its four big banks and removes its policy we will need to find our own ways to protect our economy from bank failure.

(thanks to dog on wheels for the photo)

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