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Are the Big Four too strong?

Do you agree with Bendigo and Adelaide Bank chairman Robert Johanson that the Big Four are too powerful?

Johanson reckons their market strength must be addressed to ensure Australian financial institutions retain their integrity and competitiveness.

The recent decline of the foreign banking sector in Australia has given the Big Four too much control over the financial system, Johanson told The Australian Financial Review.

“As a matter of social policy, it is essential that we don’t end up with just four homogenous oligopolies – you want to have a dynamic financial system,” he adds.

Are the big banks really as similar and anti-competitive as Johanson suggests? They compete well against each other, don’t they? And isn’t their strength the main reason that Australia is dealing with the financial crisis better than many other countries?

Is Johanson suffering from sour grapes, or is he raising important social/financial concerns? Let us know below.

Comments (13)

  1. The Big Four are big beneficiaries of the financial crisis – they are benefiting from the govt guarantee (making it cheaper from them to get finance) plus their foreign competitors have weakened. these two factors are making them more dominant. I think things are going a bit too far now.

  2. fourbyfour, the reason they are benefiting from those things is that, by in large, they are well managed firms. they deserve their good credit ratings – they were in better shape anyway to survive the crisis.

  3. In a country of just 20 million, four large banks is good enough. How many do you want??? Five, six, seven big players?

  4. What else would you expect this guy to say? Anyway, the Bendigo-A Bank merger is taking away competition.

  5. The Big Four banks have become too big and too strong, leaving less competition and diversity in the marketplace. Whether on purpose or not, the ACCC (as with the supermarkets) has taken its eye off the ball to the detriment of the public good. The Westpac / St George merger should never have been allowed.

  6. Totally agree, mndwyer. The customers do have a choice to vote with thier feet, but the general public is to scared to do anything (even more so now with the media playing up the GFC) It’s something I think will never be changed. (Both the public and ACCC’s attitude)

  7. I think to say that the big fours banks are well managed hence they are more stronger than foreign banks is an over statement. The big 4 also have an exposure to toxic assets. NAB, CBA and Westpac for example have exposures to ABS, CDS, and other toxic deriative assets. They are just not publicised and not well out in the media while they were quitely cleaning their balance sheet. The guarantee from the governmnet also helped them. They also monopolised the asset management and platform distribution hence they have a deeper pocket comapared to foreign banks to capiatlise on operation and risk management cost that they have just done lately. Like the foreign banks it was only recent that the big 4 banks placed an appropriate risk and operation managment resources and processes. The big 4 also benefited from the past where foreign banks lend them wholesale funding with low premiums. But I think this will change ging forward.

  8. ASIC was also being too nice to them given that they are mostly government banks. You obviously do not want to inflict bad name on your own back yard. This will have implications to the share price of the big 4 and this can have a ripple effect on super and pension funds.

    The big 4 was not also managed well. The big 4 banks are just lucky they are getting a lot of support from the government and regulatory bodies.

  9. Actually one of the reasons why foreign banks pull ou from Australia is because they have a very limited options of business line where they can still operate with descent profits. Given that the big 4 banks already monopolised private banking, financial planning, asset management and distributon, and corporate banking. All that was left for the big banks are wholesale funding to the big 4 banks while premiums are not even competitive. This is why you the likes of Socgen pulling out their business from Australia to Hong Kong. Aside from the fact that Socgen did not have a good operation and IT support that is adding cost to Socgen without reasonable value add. This is why you see foreign banks pulling out their operation from Australia. Low market penetration and costly operation without value add, so why will they stay?

  10. Foreign banks can actually still decide to maintain their operation in Australia and just put up satellite offices in ither Asia Pacific region but they chose to pull out and transfer their operation overseas because they are getting incompetent operation staff and IT staff in Australia. Like in the case of Socgen. In the last 5 years the IT and operation staff continued to provide sub standard services to the front office to the extent of even pushing their job to the front office. Front office was left doing operational staff which is counter productive to the core performance expected in the front offfice. The head of operation and IT was not productive in the past fie years. It is actually very surprising that the management in Paris put up with this for five years. It is only recently that they made approriate changes. We believe the like of WH Mark Sattin provided this candidates to Socgen. So warning to other global banks do not get candidates from WH Mark Sattin they will end up like the calibre of IT and operation staff from Socgen.

  11. We also heard that in the past 4 years the previous front office business analyst and portfolio managers that already left Socgen in 2008 connived with operation and IT in not disclosing the complete actual positions in their balance sheet in Australia to the management in Paris. Even their group risk did not say anything to their Paris management for 3 years. This is why you cannot blame management in the head office pulling out their operation in Australia. You cannot run a business without transparency and honest people. The management in Paris is left to explain to share holders and it is too late when they find out a mess.

  12. The big 4 banks have no big operation overseas hence they do not have the same level of exposure to operational risk like the foreign banks.

  13. Socgen, Dex and BNP Pariba will all head home and close shop here in Australia, they dont even have their products team on the floor here yet they want to do all these cross sell, they need to know this is the big boys world now.

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