Australia's biggest banks may be in for a rough ride in their domestic market. The best performing among them covet the customer base of the others. They think they can mount a compelling case for the competition authorities to allow a merger. The trouble is, so far the authorities are not convinced.
Government policy forbids a merger between any of the four biggest banks: ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp.
This policy continues in spite of a review of financial regulation by a special committee in 1997 which argued the case for mergers, and for bringing competition rules for financial services into line with those for any other industry. The government says it will allow one foreign takeover of a large bank. But so far, no potential foreign buyers have shown any interest.
Big banks want to combine because their costs are still too high and because other entrants into the banks' traditional patch have begun to do well. Providers of specialist financial products, in particular mortgages, have eroded the franchise of retail banks and slashed margins on all product lines.