ANZ and National facing tough merger rules

By PAULA OLIVER


ANZ Bank has won formal approval to merge its operations with the National Bank, but it must meet strict conditions that will soon be applied to all big banks.

The legal merger, which took place at the weekend, will not bring obvious change for customers.

Departments such as IT and corporate affairs will be brought together, but the two banks will continue to operate separate brands.

Australian-owned ANZ bought the National Bank for $5.6 billion last year in what was one of the country's biggest takeovers.

It promised its shareholders hefty profit gains from the deal. But a stern Reserve Bank of New Zealand (RBNZ) has insisted on protections for local customers should the bank's parent or another supplier get into trouble.

Among them, ANZ is required to be able to stand alone as a business in New Zealand if it needs to.

Its local board is expected to have meaningful control of the bank rather than have that come from across the Tasman.

Senior bank staff are also expected to report to local managing director Sir John Anderson and a local board of directors, which is led by Roderick Deane.

The RBNZ said last week it intended to apply the conditions to all big banks over time.

A key issue will be the level of outsourcing of back office operations such as payment systems. It is possible some banks may have to make changes as the conditions are applied.

Westpac presents the most difficult challenge for the central bank. It is still in talks over its refusal to submit to a requirement that it incorporate in New Zealand.

Its position means its local operation runs as a branch of its Australian parent rather than as a New Zealand business.

Westpac wants to avoid incorporating because it would bring a hefty tax bill. It is hopeful of satisfying the RBNZ's requirements by making other changes. Progress is expected shortly.

ANZ's legal merger with the National Bank does not mean that its own discussions with the central bank are over.

In a letter to ANZ, released last week, RBNZ Governor Dr Alan Bollard noted that there was still a lot of detailed planning to be done to flesh out the process of integration and to reach standalone capability.

ANZ has agreed to reach standalone capability by the end of December next year. It must give the central bank a detailed project plan in August explaining how it will get there. That plan is required to include auditable milestones.

Bollard recognised that as the integration project proceeded it might be necessary to vary that plan.

The Reserve Bank expected to be fully consulted on any variations.

He also reminded ANZ that the central bank had the right to impose higher capital requirements if the requirement for standalone capability was undermined.

A National Bank spokeswoman said it was too early to forecast job losses from the merger but it was hoped many would be covered by natural attrition.