Four pillars policy

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Four Pillars Policy

The “four pillars policy” is a significant governmental directive in Australia aimed at preserving the separation of the country’s four largest banks. This policy categorically rejects any proposals for mergers or acquisitions among these major banking institutions. While the policy is not a formal regulatory framework, it has been in place since 1990 and primarily addresses concerns regarding the potential concentration of financial power. Additionally, the “four pillars” policy takes into account the widespread public opposition to any further consolidation within the banking sector. Some economic commentators, particularly those with more liberalist views, have criticized the policy, arguing that it is founded on economic misconceptions and may not necessarily align with Australia’s broader economic interests.

The four largest banking groups in Australia, as of June 5, 2021, are evaluated based on their market capitalization and share prices.

Rank Company Market capitalisation (2021) Cash earnings (2021) Total assets (2021)
1 Commonwealth Bank $179.56 billion $3.89 billion $960.751 billion
2 Westpac $97.22 billion $3.44 billion $901.329 billion
3 National Australia Bank $89.46 billion $1.65 billion $766.063 billion
4 Australia & New Zealand Banking Group $81.87 billion $2.99 billion $642.298 billion


In 1990, then-Labor Treasurer Paul Keating introduced a policy known as the “six pillars,” which applied to the major banks, including the Commonwealth Bank, Westpac, National Australia Bank, and Australia & New Zealand Banking Group. This policy also encompassed two major insurers, AMP and National Mutual. Its core principle was to oppose any further mergers among these institutions. The policy emerged in response to a proposed merger between ANZ and National Mutual. Keating’s intention was to maintain a competitive landscape within the banking sector.

In 1997, a prominent business figure, Stan Wallis, conducted an inquiry into Australia’s financial system, resulting in the Final Report of the Financial System Inquiry, commonly referred to as “the Wallis report.” Wallis recommended the dismantling of the “Four Pillars” model, which would subject the major banks to the same merger competition rules as other industries. Subsequently, the then-Coalition Treasurer, Peter Costello, revoked the pillar status previously granted to the two insurers (National Mutual had already been acquired by AXA by that time). However, the prohibition on mergers among the remaining four major banks remained intact. It was emphasized that none of them were immune to foreign takeovers.

With a change of government, new Treasurer Wayne Swan declared in 2008 that the Labor government had no intentions of abolishing the four pillars policy. This policy continued to prevent mergers among the major banks while allowing the possibility of foreign takeovers. The government aimed to strike a balance between competition and stability within the Australian banking sector.

This historical evolution of Australia’s banking policies reflects the government’s ongoing commitment to fostering a competitive and secure financial environment while addressing the complex challenges presented by mergers and foreign ownership.

Legal And Policy Analysis

The four pillars policy, aimed at preserving competition in Australia’s banking sector, has not acted as an insurmountable barrier to the major banks’ acquisitions of smaller competitors. An example of this occurred in 2000 when the Commonwealth Bank successfully acquired the Colonial Group. The Colonial Group had transformed into a significant bank-insurance conglomerate during the 1990s, primarily due to the Colonial Mutual insurance group’s acquisition of the State Bank of New South Wales in 1994. The Commonwealth Bank further expanded its reach by acquiring the State Bank of Victoria in 1990 and BankWest in 2008.

Similarly, Westpac made strategic acquisitions, taking over the Challenge Bank in 1995, Bank of Melbourne in 1997, and St George Bank in 2008. These moves illustrate that the major banks have found ways to integrate smaller financial institutions into their operations despite the four pillars policy.

In 2017, Peter Costello emphasized the policy’s role in promoting stability within Australia’s financial system. He credited this stability as a key factor that helped the country weather the global financial crisis (GFC) successfully. Despite the ongoing acquisitions and expansions of the major banks, the four pillars policy continues to shape the landscape of Australia’s banking industry.


The policy in question has faced both criticism and praise for its impact on Australia’s financial landscape. On one hand, it has drawn criticism due to concerns of anti-competitiveness. This criticism stems from the perception that the policy shields the four major banks from potential takeover attempts by entities that would be the most probable suitors. This immunity from takeovers has raised questions about the competitiveness of the Australian financial sector and the potential implications for consumers.

However, the policy has also been acknowledged for its role in safeguarding the stability of the Australian financial system during the global financial crisis of 2007–08. By preventing hostile takeovers of major banks, it contributed to maintaining the strength and resilience of these institutions, which played a crucial role in ensuring the overall stability of the country’s financial sector.

Conversely, the major banks themselves have expressed reservations about the policy. They argue that constraining the size and growth of Australian banks can impede their ability to compete on the global stage, potentially limiting their international competitiveness.

In summary, this policy has generated mixed reactions, with concerns about anti-competitiveness countered by its role in protecting the Australian financial system during a period of global economic turmoil. The ongoing debate underscores the complex balance between safeguarding domestic financial stability and encouraging international competitiveness.

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