Four pillars policy

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The Four Pillars policy is a legislative policy of the Australian Government to maintain the separation of the four largest banks in Australia by disallowing their merger or acquisition by any of the other four banks.

The policy, originally a 'Six Pillar' scheme, was created by then Labor Treasurer Paul Keating in 1990. It covered the big four banks, Commonwealth Bank, Westpac, NAB, ANZ and two insurers, AMP and National Mutual. It was essentially designed to block the merger between ANZ and National Mutual at the time. Keating believed this arrangement would ensure a competitive banking market.^[1]

In 1997, leading business figure Stan Wallis' financial system inquiry (the Wallis report) recommended that the pillars be dismantled, to leave the banks subject to the same merger competition tests as other businesses. In response, then Coalition Treasurer Peter Costello's removed the pillar status of the two insurers (National Mutual had by that time already been acquired by France's AXA), however the ban on mergers of the remaining four banks was retained, with the rider that none of them were considered immune from foreign takeover.^[2]

Four pillars arguably does create competitive space for competitors to emerge. But because it is definitionally limited to the Big Four banks, it also does nothing to prevent the Big Four from eliminating competition as it arises. Four pillars was irrelevant, for example, in 2000, when CBA eliminated the Colonial group, which had emerged as a major bank-insurance combine in the 1990s after the Colonial Mutual insurance group, took over State Bank of NSW in 1994. Nor were the pillars a factor in Westpac's 1997 takeover of Bank of Melbourne, and its 1995 takeover of Challenge Bank.^[2]

The Big Four banks oppose the policy because they believe it makes them less internationally competitive, by artificially limiting their size.

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