How Australia’s Big Four banks became the Big Two

August 4, 2010


Australia’s banking sector has long been concentrated in terms of the number of banks that dominate the industry.  These are the “Big Four”: Commonwealth, Westpac, ANZ and Nab.  Now a “new report on the market shares of Australia’s major banks has found that Australia’s Big Four model is rapidly become a Big Two, with Commonwealth Bank and Westpac now holding more than 50% of the mortgage market and just under 50% of the retail deposits market.”

In other words, of the big banks have long dominated the Australian market, two are now getting bigger.  “Two banks are starting to dominate, with 50.6% of all outstanding mortgages at the end of June held by either Commonwealth Bank (26.1%) or Westpac (24.5%).” The “Big Two [also] control 48.5% of all retail deposits, with Commonwealth Bank enjoying a 27.7% share and Westpac a 20.8% share.”

What does this mean for both consumers and banking institutions other than the Big Four (or, more narrowly, the Big Two)?  Small banks in Australia are having more trouble than ever competing with ever bigger and powerful institutions and some are losing ground.  Yet some have managed to do well nonetheless by delivering services that the big banks don’t.

As for consumers, one analyst says: “Australians continue to feel more secure borrowing from the majors, even though they are not necessarily the cheapest in terms of interest rates and fees.”

  1. In what ways is the Australian banking sector ‘oligopolistic’?  In what way is it ‘competitive’?
  2. Why does Australia’s banking system appear to be becoming more concentrated?  How might the current market structure of Australian banking be contributing to this trend?
  3. How are smaller banks able to successfully compete with the “Big Four.”
  4. How do consumers benefit from ‘large-scale’ banking?  How do they lose out?

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