Four Pillars facts for kids

The four pillars policy is an Australian government rule. It makes sure that the four biggest banks in Australia stay separate. This means they cannot merge or buy each other. The goal is to keep the banking market fair and competitive.

How the Policy Started

The idea for this policy began in 1990. Back then, it was called the "six pillars" policy. It was created by Paul Keating, who was Australia's Treasurer at the time. A Treasurer is a government minister in charge of a country's money.

The original policy included the four largest banks: Commonwealth Bank, Westpac, NAB, and ANZ. It also included two big insurance companies: AMP and National Mutual. The main reason for this rule was to stop a merger between ANZ bank and National Mutual insurance company. Mr. Keating believed this rule would help keep banks competing fairly.

In 1997, a report called the "Wallis report" suggested changing the "Four Pillars" rule. It said banks should be allowed to merge like other businesses. But the government, led by Treasurer Peter Costello, decided to keep the ban on mergers between the four main banks. They did remove the two insurance companies from the policy.

Later, in 2008, the new Treasurer Wayne Swan said the government had no plans to get rid of the four pillars policy.

Banks Can Still Grow

Even with this rule, the four big banks can still buy smaller banks or companies. For example:

• In 2000, the Commonwealth Bank (CBA) bought the Colonial group. CBA also bought State Bank of Victoria in 1990 and BankWest in 2008.
• Westpac bought Challenge Bank in 1995, Bank of Melbourne in 1997, and St.George Bank in 2008.

Why People Talk About the Policy

Some people say the policy is not fair because it stops the biggest banks from competing by merging. They argue it makes the four major banks too safe from being taken over.

However, others believe the policy helped protect Australian banks during the global financial crisis of 2007–08. This was a time when many banks around the world faced big problems.

The major banks themselves sometimes say the policy limits their size. They argue this makes it harder for them to compete with very large banks in other countries.