Four pillars policy
Encyclopedia
The Four Pillars policy is a legislative policy of the Australian Government to maintain the separation of the four largest banks in Australia
by disallowing their merger or acquisition by any of the other three banks.
The policy, originally a 'Six Pillar' scheme, was created by then Labor
Treasurer Paul Keating
in 1990. It covered the big four banks, Commonwealth Bank, Westpac
, NAB
, ANZ and two insurers, AMP
and National Mutual. It was essentially designed to block the merger between ANZ and National Mutual at the time. Keating believed this arrangement would ensure a competitive banking market.
In 1997, leading business figure Stan Wallis' financial system inquiry (the Wallis report) recommended that the pillars be dismantled, to leave the banks subject to the same merger competition tests as other businesses. In response, then Coalition
Treasurer Peter Costello
's removed the pillar status of the two insurers (National Mutual had by that time already been acquired by France's AXA
), however the ban on mergers of the remaining four banks was retained, with the rider that none of them were considered immune from foreign takeover.
Four pillars arguably does create competitive space for competitors to emerge. But because it is definitionally limited to the Big Four banks, it also does nothing to prevent the Big Four from eliminating competition as it arises. Four pillars was irrelevant, for example, in 2000, when CBA eliminated 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 NSW in 1994. Nor were the pillars a factor in Westpac's takeovers of the Challenge Bank in 1995, the Bank of Melbourne in 1997 and St.George Bank in 2008.
The Big Four banks oppose the policy because they believe it makes them less internationally competitive, by artificially limiting their size.
Banks of Australia
The bank sector in Australia consists of a number of banks licensed to carry on banking business under the Banking Act 1959, foreign banks licensed to operate through a branch in Australia, and Australian-incorporated foreign bank subsidiaries...
by disallowing their merger or acquisition by any of the other three banks.
The policy, originally a 'Six Pillar' scheme, was created by then Labor
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...
Treasurer Paul Keating
Paul Keating
Paul John Keating was the 24th Prime Minister of Australia, serving from 1991 to 1996. Keating was elected as the federal Labor member for Blaxland in 1969 and came to prominence as the reformist treasurer of the Hawke Labor government, which came to power at the 1983 election...
in 1990. It covered the big four banks, Commonwealth Bank, Westpac
Westpac
Westpac , is a multinational financial services, one of the Australian "big four" banks and the second-largest bank in New Zealand....
, NAB
National Australia Bank
National Australia Bank is one of the four largest financial institutions in Australia in terms of market capitalisation and customers. NAB is ranked 17th largest bank in the world measured by market capitalisation...
, ANZ and two insurers, AMP
AMP Limited
AMP Limited is an Australian financial corporation. It operates primarily in Australia and New Zealand. AMP formed in 1849 as the Australian Mutual Provident Society, a non-profit life insurance company. In 1998 it was demutualised and listed on the Australian and New Zealand stock exchanges...
and National Mutual. It was essentially designed to block the merger between ANZ and National Mutual at the time. Keating believed this arrangement would ensure a competitive banking market.
In 1997, leading business figure Stan Wallis' financial system inquiry (the Wallis report) recommended that the pillars be dismantled, to leave the banks subject to the same merger competition tests as other businesses. In response, then Coalition
Liberal Party of Australia
The Liberal Party of Australia is an Australian political party.Founded a year after the 1943 federal election to replace the United Australia Party, the centre-right Liberal Party typically competes with the centre-left Australian Labor Party for political office...
Treasurer Peter Costello
Peter Costello
Peter Howard Costello AC is an Australian politician and lawyer who served as the Treasurer in the Australian government from 1996 to 2007. He is the longest-serving Treasurer in Australian history. Costello was a Member of the Australian House of Representatives from 1990 to 2009, representing...
's removed the pillar status of the two insurers (National Mutual had by that time already been acquired by France's AXA
AXA
AXA S.A. is a French global insurance group headquartered in the 8th arrondissement of Paris. AXA is a conglomerate of independently run businesses, operated according to the laws and regulations of many different countries. The AXA group of companies engage in life, health and other forms of...
), however the ban on mergers of the remaining four banks was retained, with the rider that none of them were considered immune from foreign takeover.
Four pillars arguably does create competitive space for competitors to emerge. But because it is definitionally limited to the Big Four banks, it also does nothing to prevent the Big Four from eliminating competition as it arises. Four pillars was irrelevant, for example, in 2000, when CBA eliminated the Colonial group
Colonial First State
Colonial First State was established in 1988 and is now one of Australia's leading wealth management groups, with more than A$90 billion under management. It is owned by the Commonwealth Bank Group.- Product range :...
, which had emerged as a major bank-insurance combine in the 1990s after the Colonial Mutual insurance group, took over State Bank of NSW in 1994. Nor were the pillars a factor in Westpac's takeovers of the Challenge Bank in 1995, the Bank of Melbourne in 1997 and St.George Bank in 2008.
The Big Four banks oppose the policy because they believe it makes them less internationally competitive, by artificially limiting their size.