Westpac and St George have gone into a trading half this morning as new Westpac CEO Gail Kelly attempts to hammer out a friendly takeover of the bank she ran for five years until defecting last year.

Kelly has only been running Westpac since February 1 and is now attempting to buy St George Bank for about $16 billion worth of Westpac shares in the biggest takeover in Australian history.

Bold move Gail, but it should be instantly dismissed by our federal politicians and regulators on competition grounds.

As a nation we already suffer from the world’s most expensive banking system, despite the ban on mergers between the Big Four banks. Now bank number three wants to buy bank number five to become a new number one which can only mean more concentration, staff cuts and higher profits from consumers getting slugged.

Westpac’s two page press release includes this single bolded sentence: “The intention is that there will be no net reduction in branch or ATM numbers.”

Yeah, and I remember going to the Bob Joss press conference on April 2, 1997 when Westpac launched its $1.4 billion takeover of Bank of Melbourne, promising to retain branches, branding and low fees. It must have been a non-core promise and Joss, just like his successor David Morgan, has retired with a $50 million-plus pile courtesy of his share of the bank cartel’s profit bonanza that now generates more than $20 billion a year pre-tax out of Australia alone.

When Westpac was created after the 1982 merger between the Bank of New South Wales and the Melbourne-based Commercial Bank of Australia, it spent much of the next few years as “Australia’s biggest bank”.

That all fell apart with Paul Keating’s recession we had to have — 17% interest rates, the property crash and appalling lending practices almost sent it broke in 1992 when a $1.6 billion loss was declared.

Fast forward 16 years and Westpac is about to reclaim the title of “Australia’s biggest bank” with the following list of smaller rivals in its belly: Challenge Bank, St George Bank, State Bank of South Australia, Bank of Melbourne and Advance Bank.

This would be more regional mop-ups than the other big three banks combined.

The market knows full well what this means for profits as NAB shares soared 4% in morning trade whilst CBA and ANZ each gained 2% despite Wall Street tumbling 121 points on Friday night.

Wayne Swan is the man to block this deal, but first we need to know whether ACCC chairman Graeme Samuel has a job beyond his current term, which expires in July?

Samuel was at odds with his predecessor Allan Fels on The 7.30 Report last Thursday when he projected a contentedness about the current competition policy settings. He even inflamed farmers by claiming “they cannot give a single specific example” of supermarket gouging. Does Samuel reckon Australian banking consumers are getting a good ride?

Australia has long had a problem with corporate concentration and it is only getting worse with BHP’s bid for Rio Tinto, QBE’s crack at IAG and now this Westpac bid for St George.

The last time a Labor government had a major financial merger to approve, Paul Keating rejected ANZ’s attempt to buy National Mutual in 1991. The Rudd Government should do exactly the same thing to this Westpac bid for St George and also find a new consumer champion to replace Graeme Samuel. Fast.