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Updated Monday, December 7, 2009 10:41 am TWN, By Jason Scott, Bloomberg

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Australia's Big Four to face more competition: PM Rudd

While the guarantees enabled Australian banks to raise funds on international markets, helping lenders avoid the bankruptcies that have hampered the U.S. financial system, they also led to a flight of customers to the Big Four from credit unions and building societies.

Australia's top four banks held deposits of A$861.6 billion at the end of August, up 17 percent from a year earlier, data published by the Australian Prudential Regulation Authority show.

The government is consulting with regulators about when to withdraw its bank guarantees, Swan said.

Out of Sync

The Reserve Bank of Australia raised its benchmark interest rate by a quarter point for an unprecedented third straight month to 3.75 percent on Dec. 1.

Of Australia's four biggest banks, only National Australia Bank Ltd., the country's third-biggest mortgage provider, contained its mortgage rate increase to 25 basis points, the same as the Reserve Bank, taking its standard variable home-loan rate to 6.49 percent.

Commonwealth Bank, Australia's largest home-loan provider, raised its equivalent by 37 basis points to 6.61 percent. ANZ Bank increased its charge by 35 basis points to 6.66 percent and Westpac pushed up its rate by 45 basis points to 6.76 percent.

“This is one reason the big banks are criticized by the Australian community,” Swan said. “Any bank that used the Reserve Bank's official rate rise as an excuse to take families for a ride this Christmas is letting down their customers and their country.”

Blocking Mergers

Local banks have less competition as foreign banks exit institutional lending and non-bank lenders stop residential mortgage loans, regulator Samuel told ABC Television's Inside Business program today. The only way the competition commission can act is to block mergers that may be anti-competitive, he said.

“I think you would have to say that it would be a difficult ask to see any more of the regional banks moving into the fold of the major trading banks in light of the global financial crisis,” Samuel said.

“One should never say never,” he said. “What we have said is we will examine these very critically in the context of both competition in the banking market today, but more importantly the likely prognosis for competition into the forseeable future.”

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