What to expect when your bank gets bought out

ANZ’s planned purchase of Suncorp Bank could not only affect its business, but its customers as well. What could happen to you if your bank or lender suddenly became the property of another banking brand?

ANZ has proposed to acquire the banking business of Suncorp for $4.9 billion, which would leave Suncorp a purely insurance-based business. The acquisition would also increase ANZ’s share of Australian home loans to approximately 15.4%.

The Australian Competition and Consumer Commission (ACCC) is to review the proposed acquisition, and authorise it “if it is satisfied that either the proposed acquisition would not be likely to have the effect of substantially lessening competition, or the likely public benefit resulting from the proposed acquisition would outweigh the likely resulting public detriment.” The Federal Treasurer will also need to approve the acquisition, which is expected to be completed by the second half of calendar year 2023.

While some banks and economists have welcomed the news, there has also been some criticism from other banks, unions, mortgage brokers and economists, mostly along the lines that the acquisition could reduce competition in Australia’s banking marketplace, leaving the big four – ANZ, Commonwealth Bank, NAB and Westpac – to get bigger.

This is bad news for Australian bank customers. Less competition, less choice. A regional bank being gobbled up by an underperforming major is not going to improve our financial system https://t.co/TrhjUXKQjE

— Warren Hogan (@_warrenhogan) July 18, 2022

Speaking to the AFR, Finance Brokers Association of Australia managing director, Peter White, said:

“If we go back to the ’80s when there was no competition, interest rate margins above cost of funds were two to three times what they are now. This would disadvantage consumers if it were to happen again, particularly at a time when costs of funds are rising globally.”

So, if you bank with a mid-size or smaller lender, what could you expect if a bigger bank was to come along and buy out your bank?

A bank acquisition may change the names in some fine print, but otherwise leave things largely untouched. This may occur if the bank being purchased already has a well-established name and reputation that the purchasing bank would like to benefit from, as well as a loyal customer base.

Several banks are already owned by larger banks, but continue to operate more or less independently regardless. For example, Westpac owns St. George, Bank of Melbourne, BankSA, BT and RAMS, which have their own branches, ATMs and more.

In the case of Suncorp, ANZ licensed the Suncorp Brand for another five to seven years.

Sometimes when a bank or lender is taken over by another organisation, its operations are absorbed into that company. While your accounts and financial products may remain the same, they may now be dressed up in the new brand’s corporate colours and be using the new owner’s name.

A recent example was when ubank (itself owned by NAB) acquired fintech 86 400. Both companies now operate under the ubank name, though with some of 86 400’s colours and brand styling, making 86 400’s technology available to ubank’s customers.

Will you lose all your saved money if your bank goes belly-up? And what about your loans and credit cards? In Australia, if your bank goes out of business, there are measures in place to help protect the bank’s customers.

To accept deposits from customers in Australia, a bank must be registered as an Authorised Deposit-taking Institution or ADI. Money that’s deposited with an ADI is covered by the government under the Financial Claims Scheme or FCS, up to $250,000 per ADI. So, if your bank was to go out of business, you’re guaranteed to get up to $250,000 in your deposits back.

If you have more than $250,000 in your savings, you may consider depositing smaller sums with different ADIs to help ensure they’re all covered under the FCS. This could potentially lead to risks if one of these banks buys another – because both institutions may now operate under a single ADI license, you may only be guaranteed up to the $250,000 cap if the combined bank was to go under.

In the case of ANZ and Suncorp, Suncorp Bank is to initially operate under its existing ADI licence with no changes to the total number of Suncorp Bank branches in Queensland for at least three years from completion of the acquisition.

As for credit products, such as home loans, personal loans, car loans or credit cards, it’s likely that another lender will purchase these debts if your bank was to go out of business. Your contracted loan terms and conditions should continue to apply, so you’d keep making repayments as usual to the new lender.