The Albanese government is in negotiations with Commonwealth Bank to set up shop in Nauru to help counter China’s growing influence in the South Pacific and among Australia’s closest neighbours.
Three sources told The Australian Financial Review the talks were progressing, and it is understood there is debate about how much taxpayer support is warranted to set up a Nauru operation – a financial services venture that is likely to have little commercial appeal for the nation’s largest bank.
The Australian government has worked to limit the influence of Beijing in the region over the past two years.
“CBA representatives recently attended the Pacific Banking Forum in Brisbane and met with a range of parties to discuss banking services in the Pacific region,” a bank spokeswoman told the Financial Review.
The Department of Foreign Affairs and Trade was contacted for comment but did not reply before deadline. A reply was also sought from Treasurer Jim Chalmers’ office.
While Nauru once attracted strong interest from offshore banks due to its looser regulatory settings, the government cracked down on its then-sprawling banking industry in the early 2000s and cancelled hundreds of licences.
The government closed the Bank of Nauru in 2006, facilitating a cash-only economy until 2015 when it struck an agreement with Bendigo & Adelaide Bank to provide limited financial services. Bendigo last year said it would exit Nauru “to reduce complexity and simplify its business”.
Bendigo planned to leave Nauru by December but extended this to June next year after the Nauruan government signed a memorandum of understanding with the Bank of China to explore a succession plan.
Should a deal with CBA be struck, it would not be the first time the federal government has relied on the private sector to stymie Beijing’s reach in the region.
Only last year, Westpac cancelled the sale of its Papua New Guinean and Fijian arm after extended talks with the Albanese government.
In 2022, the government funded the majority of Telstra’s US$1.6 billion (AUD$2.46 billion) takeover of the troubled telco Digicel Pacific amid concerns that Chinese interests could buy the asset and use its network to spy on Australia and its Pacific neighbours.
Bendigo has previously indicated it would “provide assistance and support to enable an orderly transition to a new provider”, but declined to comment on Friday.
The issue of banking in the underserved Pacific market is of acute interest to both the Australian and US governments, which co-hosted the Pacific Banking Forum in Brisbane last month.
The forum backed efforts to “address the decline” in the Pacific region of correspondent banks, where one bank transacts on behalf of another.
“The banks commit to exploring ongoing opportunities and engaging Pacific Island governments and respondent banks to consider strengthening [correspondent banking relationships] through the region”, the outcomes statement from the 8-9 July event said.
ANZ boss Shayne Elliott told the Forum governments and regulators had to align their rules to attract sufficient interest from established banks in developed economies.
“From a commercial perspective, our suggestion is that banks will find the Pacific Island region more attractive if its countries can take co-ordinated steps to reduce both cost and risk,” Elliott said.
ANZ has a presence in the Cook Islands, Fiji, PNG, Samoa, Tonga, Vanuatu and the Solomon Islands.
“Adopting common laws, implementing consistent regulation, and enhancing regional financial crime efforts will make the Pacific Islands a more attractive place for banks to do business,” Elliott said.
