The fight for AXA Asia Pacific and the implications for consolidation

Mike Taylor looks at the ACCC's report on NAB's and AMP's bids for AXA Asia Pacific, as well as industry consolidation in general.

Consolidation of the Australian financial services industry is inevitable, but will it prove to be in the best interests of consumers and does the competition regulator, the Australian Competition and Consumer Commission (ACCC), fully understand the intricacies of the industry?

Late last month, Money Management published research from Wealth Insights revealing the degree to which the big four banks now dominate the platforms market, and last week an analyst’s report issued by Credit Suisse confirmed the degree to which the very same banks now dominate in-force premiums in life insurance.

It is no secret that the global financial crisis, the liquidity drought and the Government’s bank guarantee have also handed the major banks greater dominance of the mortgage industry.

Market dominance is one thing, but what should also be on the radar for the competition regulator is the degree to which that dominance precludes the entry of new players.

So the issue for the ACCC in dealing with National Australia Bank’s (NAB’s) bid for AXA Asia Pacific ought not be whether it will hand too much power to NAB on its own, but whether it will hand too much power to the big four banks as an oligopoly.

There is a tendency for government departments and agencies, with the exception of the industry-specific regulators, to take a simplistic and too shallow view of the financial services industry.

The result has been that the fallout from Westpac’s merger with St George has been arguably much greater than the ACCC actually envisaged.

Perhaps if the competition regulator had ensured its officers had spent some hands-on time with personnel from the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority, it may have gained a better understanding of the intricacies and nuances of the financial services industry.

Then again, there have been instances where the financial services regulators themselves have appeared to lack sufficient knowledge of the industry, particularly where highly structured products and marginal practices are concerned.

However, the ACCC’s preliminary analysis of the AMP and NAB bids for AXA suggests it is learning from experience and now has a greater understanding of the linkages that make up the financial services industry and, particularly, the centrality of platforms.

Indeed, the preliminary analysis nicely encapsulates precisely why the AMP bid represents the lesser of two competition evils.

It ought be a matter of concern for the chairman of the ACCC, Graham Samuel, that there are many in the financial services industry who believe NAB’s acquisition of AXA Asia Pacific is a done deal. This time, however, the ACCC may not be a rubber stamp.