The Australian banking industry is the most concentrated in the world and also the most profitable. In fact the ‘big four’ Australian banks make up four of the eight most profitable banks in the world.
The big banks have conceded that they are not highly competitive but have argued that their market power provides benefits in the form of ‘financial stability’. Yet in other contexts the big four banks argue that they are highly competitive. The following evidence shows clearly that this is not the case.
This paper examines the common ownership of the big four banks. It finds that the degree of common ownership seriously challenges the idea that the big four banks are engaged in fierce competition.