Ruqayyah Snyder
Australia's banking sector is dominated by the big four banks: Commonwealth Bank, Westpac, National Australia Bank, and Australia & New Zealand Banking Group. These banks account for a large proportion of the $5.5 trillion Australian banking sector. While there are several smaller banks, including Bendigo and Adelaide Bank, Suncorp Bank, and foreign banks such as HSBC Bank Australia, the big four have also acquired smaller competitors. The Australian government's direct ownership of banks ceased with the privatisation of the Commonwealth Bank between 1991 and 1996, and the government has since adopted a 'four pillars policy', rejecting any mergers between the big four.
| Characteristics | Values |
|---|---|
| Number of banks owned by the Australian government | 0 |
| Last bank owned by the government | Commonwealth Bank |
| Period of government ownership | 1931–1996 |
| Reason for government ownership | Great Depression of the 1930s |
| Bank taken over during this period | Government Savings Bank of New South Wales, State Savings Bank of Western Australia, State Bank of Victoria |
| Current status of the Commonwealth Bank | Privatized |
| Current major banks in Australia | Commonwealth Bank, Westpac, Australia & New Zealand Banking Group, National Australia Bank |
| Other smaller banks in Australia | Bendigo and Adelaide Bank, Suncorp Bank, HSBC Bank Australia, Bank of Sydney, Citibank Australia |
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What You'll Learn
The Commonwealth Bank was once government-owned
Banking in Australia is dominated by four major banks, namely the Commonwealth Bank, Westpac, Australia & New Zealand Banking Group, and National Australia Bank. The Commonwealth Bank of Australia (CBA), also known as Commonwealth Bank or CommBank, is an Australian multinational bank with businesses across New Zealand, Asia, the United States, and the United Kingdom.
The Commonwealth Bank was founded under the Commonwealth Bank Act in 1911 and commenced operations in 1912. It was established by the Andrew Fisher Labor government, which favoured bank nationalisation. The bank was empowered to conduct both savings and general banking business. It was also the first bank in Australia to receive a federal government guarantee.
The Commonwealth Bank is the largest Australian-listed company on the Australian Securities Exchange as of July 2024. It is also the No.1 Australian company and the No.1 bank in the world on the Global 100 Index for demonstrating strong Environmental, Social, and Governance (ESG) practices.
The Australian government's direct ownership of banks ceased with the full privatisation of the Commonwealth Bank between 1991 and 1996. The first share offer in 1991 was valued at $1,292 million, the second in 1993 for $1,700 million, and the third was sold for $5,000 million in 1996.
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The Reserve Bank of Australia is the central bank
Australia's central bank is the Reserve Bank of Australia (RBA). The RBA has been the country's central bank and banknote-issuing authority since 14 January 1960, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank.
The RBA's main policy role is to control inflation levels within a target range of 2–3%. It achieves this by controlling the unemployment rate according to the 'non-accelerating inflation rate of unemployment' (NAIRU) and adjusting the official cash rate. The RBA is also responsible for issuing banknotes and acting as the government's bank and debt manager.
The RBA plays a crucial role in maintaining financial stability in Australia. It supervises financial institutions, including authorised deposit-taking institutions (ADIs), under the Banking Act 1959. The RBA also implements the Financial Claims Scheme, which guarantees deposits up to $250,000 per account holder per ADI in case of institutional failure.
Prior to the establishment of the RBA, the Commonwealth Bank served as Australia's central bank. The Commonwealth Bank was wholly owned by the Federal Government until its full privatisation between 1991 and 1996. During this time, the Commonwealth Bank also acquired or took over several state-owned banks, such as the Government Savings Bank of New South Wales and the State Savings Bank of Western Australia.
Today, Australia's banking sector is dominated by four major banks: Commonwealth Bank, Westpac, Australia & New Zealand Banking Group (ANZ), and National Australia Bank (NAB). These "big four" banks account for a significant portion of the country's banking landscape, with numerous smaller banks and financial institutions also operating in the market.
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$59.21 $127
The four pillars policy
Australia's banking sector is dominated by four major banks: the Commonwealth Bank, Westpac, Australia and New Zealand Banking Group, and National Australia Bank. These banks are commonly referred to as the "four pillars" of the Australian banking system.
The "four pillars policy" is a unique aspect of Australia's banking landscape. This policy was first articulated in 1990 by the then-Labor Treasurer, Paul Keating, as a response to competitive concerns and the broad political unpopularity of bank mergers. The policy aims to maintain the separation of these four largest banks by rejecting any merger or acquisition attempts between them. It reflects a cautious approach to the concentration of banking power and is designed to prevent the creation of an even more powerful and dominant banking entity through a merger.
Despite the four pillars policy, the four major banks have not been prevented from acquiring smaller competitors. For example, CBA acquired the Colonial Group in 2000, while Westpac took over St George Bank in 2008. Additionally, the policy does not prevent foreign takeovers, and Australia's banking sector includes several foreign subsidiary banks, such as HSBC Bank Australia and Citibank Australia, although their retail presence is limited.
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The big four banks
The Australian government's direct ownership of banks ceased with the full privatisation of the Commonwealth Bank between 1991 and 1996. However, the country's banking sector is dominated by the "Big Four" banks, which are the four largest banks that have historically dominated Australia's banking industry in terms of market share, revenue, and total assets.
The "Big Four" banks in Australia are the Commonwealth Bank, Westpac, Australia & New Zealand Banking Group, and National Australia Bank. These banks are sometimes referred to collectively as the "big banks" or the "big Aussie banks". They hold more than 80% of all loans from mortgage borrowers, and their dominance has been maintained through acquisitions and mergers with smaller banks. For example, Westpac acquired St George Bank in 2008, and CBA acquired BankWest the same year.
The Australian government has a longstanding policy called the "four pillars policy" aimed at preventing mergers between the Big Four banks to preserve a level of competition in the banking sector. However, this policy has not prevented the four major banks from acquiring smaller competitors. The Big Four have become some of the most profitable banks in the world, and their dominance has led to concerns about a lack of competition in the Australian banking market.
The high level of concentration in the Australian banking industry has given the Big Four significant power and flexibility in setting their terms. This has resulted in higher charges for customers due to reduced competition. Despite this, consumers have shown a high level of satisfaction with the Big Four banks, and their brand values remain the highest in the financial market.
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The Australian Prudential Regulation Authority
APRA's predecessor regulators were the Insurance and Superannuation Commission, the Reserve Bank of Australia, and the Australian Financial Institutions Commission (AFIC). The role of the Australian Prudential Regulation Commission (APRA's former self) was amended to deal with prudential regulation of authorised deposit-taking institutions (ADIs), life and general insurance, and superannuation, including industry superannuation.
APRA establishes prudential standards with which regulated institutions must comply. It ensures that financial institutions keep their financial promises and remain financially sound and able to meet their obligations to depositors, fund members, and policyholders. APRA currently supervises institutions holding A$8.6 trillion in assets for Australian depositors, policyholders, and superannuation fund members. It regulates 1,790 financial institutions, including banks, credit unions, building societies, friendly societies, general insurance, health insurance, reinsurance, and life insurance companies, and most members of the superannuation industry.
APRA is also the national statistical agency for the financial sector, collecting data for its own use, as well as for the Reserve Bank of Australia and the Australian Bureau of Statistics. It regularly aggregates and publishes this data, including by industry.
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Frequently asked questions
As of 1991, no banks in Australia are owned by the government. The Commonwealth Bank was the last government-owned bank, and it was privatised between 1991 and 1996.
The "four pillars policy" is the Australian government's commitment to rejecting any mergers between the four biggest banks in the country. This policy was adopted in 1990. The four banks are the Commonwealth Bank, Westpac, Australia & New Zealand Banking Group, and National Australia Bank.
The Reserve Bank of Australia (RBA) is Australia's central bank and banknote-issuing authority. It has been the central bank since 1960, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank.
