Editorial Bank Merger Must Pass All The Right Tests

Illawarra Mercury

Wednesday May 14, 2008

WHILE analysts say the proposed Westpac and St George Bank merger does not contravene the "four pillars" policy, the wider community should feel nervous about the impending marriage. Australia has one of the safest and best regulated banking markets in the world and because of this we have been insulated from the sub-prime mortgage crisis. The four big banks have had enough room to operate in to generate record profits while small institutions have been able to build their brands and client bases. St George has been one of the beneficiaries in this environment and has grown to be the biggest in the small pond. But now St George is about to be gobbled up by Westpac to create Australia's largest bank, a $66 billion entity. We should be worried for several reasons, primarily because by definition it takes a player out of the market. We are promised the St George brand will not be lost, nor its products, nor access to branches and ATMs. But at a time when the credibility of banks is at an all-time low we are naturally cynical about what the future holds. That Westpac boss Gail Kelly, formerly in charge at St George, knows where to save millions of dollars should excite shareholders. But the national interest demands regulators put this proposal through every hoop possible so we preserve a largely healthy and competitive market.