Banking concentration

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Australia - "Future bank mergers 'a difficult ask'"

"The head of the competition watchdog has all but ruled out further mergers between major and regional banks in the wake of the global financial downturn.

The Australian Competition and Consumer Commission (ACCC) chairman, Graeme Samuel, says the banking and finance market in Australia has changed significantly in the past year, and there is less competition.

Mr Samuel has told ABC1's Inside Business program any proposed mergers would be examined very critically, based on the existing and likely future competition.

"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," he said.

"There's even a question that you might ask, that if Westpac were to seek to acquire St George today rather than prior to the global financial crisis, whether we'd have the same view as what we had back then."

Three of the four big banks have raised their home loan rates by more than the Reserve Bank's quarter of a percentage point increase last week.

The Sunday Telegraph has published analysis today claiming the Big Four banks take an extra $3,000 a year from average homeowners and credit card users because of the global financial crisis.

Mr Samuel argues that banks have been left with fewer competitors as foreign banks exit institutional lending and non-bank lenders leave the residential mortgages market.

"So there's less competition. Does that result in higher interest rates? Well, generally when you've got less competition, you'll have higher prices being charged."

But he says the only way the ACCC can act is to block mergers that are potentially anti-competive.

"One should never say never ... 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," he said.

The Federal Opposition says the Government should do more to increase competition among banks, so they keep their mortgage rates in line with the official interest rate rise.

Housing spokesman Scott Morrison says the Government should follow the lead of Canada and guarantee mortgages rather than the banks.

"What that does is create a level playing field for all of the providers of home loan finance," he said.

"As a result it meant the smaller banks were able to stay in the market which kept competition up and at the end of the day interest rates have also stayed lower. So there are policy alternatives. The government's way is not the only way."

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