The Australian Competition and Consumer Commission would continue with the case-by-case approach in its approach to banking mergers, ACCC Chairman Professor Allan Fels, told a banking conference* in Sydney today.

Discussing recent banking activity which had been considered by the ACCC, particularly the Westpac/Challenge merger, Professor Fels said the ACCC had concluded that the relevant geographic area of the market was regional.

"But the Commission's view is not a static one. There are technological advances of all sorts occurring and the ACCC recognises, and recognised at the time, that the view it formed in the Westpac/Challenge matter must at an appropriate point in the future be open to reconsideration as technology changes, as customer behaviour, for whatever reason, also changes, and perhaps also as regulation changes.

"There are now conferences focusing on 'virtual banks' and a completely Internet-based bank has opened in the US, while in Australia one regional is offering an Internet banking service to complement its other tele-banking operations.

"These developments could, over time, affect the geographic dimension of market definition, and the ACCC has always recognised that, but the fact remains that the market for retail banking services is still properly classed as a regional market.

"Considerations such as the propensity of customers to switch to interstate suppliers in response to local price rises apply to the definition of the geographic scope of the market.

"The Commission has not closed off these possibilities but their mere promise is not sufficient at this time to widen the geographic and product dimensions of the market. If the market evolves in the way suggested, the ACCC will assess it accordingly in future bank acquisitions. Incidentally this point was made fairly clearly at the time of the Westpac/Challenge decision.

Turning to comments made by the Australian Consumers Association during the conference about claimed increases in fees and charges levied on accounts, Professor Fels urged consumers to 'shop around' for the deal which suited them best.

"I am firmly of the view that the results of the ACA's updated survey of fees and charges should make people stop and think about value for service - then exercise their right to shop around for the best deal. The survey is, of course, of current, standard accounts - it does not reflect the costs of those who will shift to the new 'no-frills accounts' being brought on stream over the next few weeks by the major trading banks.

"The ACA survey is a powerful demonstration that banks are altering fees and charges substantially at the present time. Some individuals may benefit but others will lose. As a result consumers need very especially at this time to assess proactively the costs of bank accounts and services. Banks have a high duty to keep consumers fully informed of new or higher charges and of details of new 'no-frills' accounts. At this time consumers need to proactively consider changing to bank accounts that are more suitable for their needs and to seriously look into whether other banks and institutions would give them a better deal.

"I would remind the banks that the PSA did recommend that any changes to fee structures should occur in a revenue-neutral way. The ACCC would be highly concerned, as would the community, if changes in bank fee structures claimed to be cost-justified led to higher net profits.

"The PSA was critical of charges that were related to balance size and with the no frills accounts, the banks are moving towards a response."

Professor Fels said the banks were "moving in the right direction as far as no frills accounts are concerned, albeit slowly".

"I reiterate that customers should especially this time review their banking needs and put further pressure on all financial services by demanding more - just as some canny home mortgage buyers are now. There is a degree of competition in financial services - to this extent consumers should review their needs and shop around banks, credit unions and building societies for the best deal.

"Additionally, let me note also that there have been indications from the major political parties, that they support monitoring of bank fees and charges by the ACCC."