The Australian Competition and Consumer Commission will not oppose the proposed merger of St George Bank Ltd and Advance Bank Ltd, Acting ACCC Chairman, Mr Allan Asher, announced today.

"The ACCC has examined the proposed merger and does not believe that it will substantially lessen competition," Mr Asher said.

"In fact, we see that there is potential for the merger to be pro-competitive as it will allow the merged entity, with strong operations in both NSW and South Australia, to compete more vigorously with the major banks in these areas.

"Banks, especially the majors, are shielded from a lot of potential competition because of restrictions in the Bank (Shareholdings) Act and the Foreign Acquisitions and Takeovers Act," Mr Asher said. "Mergers such as this one, which strengthen the important second tier of banks and ensure market diversity, are one of the few ways in which vigorous competition with the major banks can be promoted."

The proposal involves an ‘in-market’ merger between two banks based in the Sydney metropolitan area, with the significant addition of the BankSA operations. The nature, history and background of St George Bank and Advance Bank are in many ways similar, with similar types of operations and a common history as building societies before conversion to banks. They will be well placed to expand their operations because of the increased size, scope of operations and financial strength resulting from the merger.

"In assessing the effect of the merger on competition the ACCC has continued to proceed on a case-by-case basis, looking at the particular merger in the circumstances which apply at the time."

Mr Asher said the ACCC did not believe that the new entity could be regarded as a national trading bank.

"The ACCC has been advised that the merged entity’s total assets will be about $40 billion. This is less than half that of the smallest of the major banks. In addition, the new bank does not have national operations and is not strongly represented in all States and Territories. There are also historical and even cultural aspects to what comprises a major bank in Australia. The ACCC believes that the new entity would see it as being a long way off qualifying as a major bank."

Mr Asher said that the ACCC will watch the progress of the merger proposal with interest.

"We will follow any developments which may flow from this proposal very closely to see what effect it might have on the overall structure of the industry, bearing in mind the restrictions which apply during the currency of the Financial System Inquiry.

"This merger does not affect the ACCC’s long held view on the importance of having a strong regional bank in each State," Mr Asher said.