The "Four Pillars" protection racket for Australia's biggest banks looks like it may soon be history, paving the way toward agreed or mildly hostile offers to rearrange the inefficient, high cost legacy of ANZ, Westpac, NAB and CommBank and their kin.
Hectic M&A days in banking looks like being the principal product of the most radical report yet on the finance industry, courtesy of a mammoth and passionate final report from the Productivity Commission on Competition in the Australian Financial System.
The 22-year old Four Pillars policy "is a redundant convention", the Productivity Commission declared loud and proud today in its report.
Seekers of mergers and acquisitions, Banking Day among them, may not be made to wait for long for proposals sure to be centred on drastic (but controversial) cost savings, branch closures and mass redundancies. And lower fees for users.
Big banks and their industry association have pestered on and off since the late 1990s for a relaxing of this rule. In June 2008, ANZ and NAB got as far as taking an agreed merger to then treasurer, Wayne Swan.
But, as Swan related in his book 'The Good Fight', such a merger "would have left us with just three banks … I was never going to be turning for this," amid the crescendo of the GFC.
Amid so much more bother in banking in Australia, enthusiasts will have to punt that favoured merger proposals won't take long to negotiate, or shouldn't.
There are "sufficient provisions" within three primary laws governing banking to deal with the policy aims of Four Pillars, the Productivity Commission argued in its report. These are the Competition and Consumer Act 2010, the Banking Act 1959 and the Financial Sector (Shareholdings) Act 1998.
This clutch of laws "gives the government or the designated regulators power to intervene to ensure competition, prudential outcomes and the broader public interest are protected," or so the report's author's believe.
The PC had no truck for long-standing assumptions underpinning a policy decreed in the early days of the Howard government.
"There is no evidence that the Four Pillars policy has enhanced competition; and far more
reasons to conclude that it may have dissuaded it by embedding a fixed market
structure."
In a 674 page document that diverges little from the main themes of the draft report in February, the commission's three-member panel directs an urgent reform agenda, elements of which the treasurer, Scott Morrison, seems more ready to resist than cheer.
Requested by the federal government back in July 2017, this final report into Competition in the Australian Financial System is the work of a three person panel of the Productivity Commission: Peter Harris, chair of the commission, Julie Abramson and Stephen King.