The Global Ripple Effect: Australia’s Banks are Consolidating
May 12th, 2008 by Kathy Ptouchkina | Leave a comment on this post below!
If, as most say, there are no geographical borders for the spread of global trade and economic prosperity, why should it be any different for an economic slowdown? More and more we see in the news how the U.S. credit crunch spreads across the globe as a dangerous economic virus.
Now the consequences of the tight lending, unstable currency, and volatile financial conditions are at the doorstep of Aussie banks.
According to Australia’s Four Pillars policy, the country’s four largest banks are prohibited from merging with one another. However, the restriction did not stop Westpac, one of the top 4 banks in Australia, from approaching the rival lender St. George Bank, fifth largest in the country, with a takeover offer.
If the takeover goes through, it will create the country’s largest financial-services institution with the market capitalization value of 63.7 billion Australian dollars (about $60 billion U.S.). Even though it is expected to be an all-equity deal, The Wall Street Journal reports, the exact value of the offer has not been announced yet.
The takeover is believed to strengthen the Aussie financial industry and help banks to withstand the pressure of spreading credit crisis. From Westpac Chairman Ted Stevens:
“St. George and Westpac are two highly successful banks, but we believe they would be stronger together in a way that allows both to harness the strength of each, while maintaining their unique identities and market positions,”
The ripple effect of the global economic slowdown is hard to prevent. However, the strength and resilience of the economy can be evaluated by the effectiveness of the measures used to combat the problem. Later down the road we will be able to compare recession policies used in US (i.e. cutting rates dramatically) and those used in other countries like Britain and Australia.
Filed under News and Analysis