Graeme Samuel, chair of the Australian Competition and Consumer Commission, said he would be "gravely concerned" about any merger that strengthens the position of one of the big banks at the expense of regional and non-bank lenders.Speaking to ABC Television, Samuel described the current level of competition as "little better than workable"."I'd have to say that if we were looking at any mergers involving one of the big four banks in Australia, we would be looking at it very rigorously indeed," he said."We would not take at first blush any advice that we might receive - say, for example, from overseas parents or otherwise - that in the absence of a merger we might have a failing bank or a failing financial institution."But even if we looked at it carefully indeed ... there would be grave concerns about any further significant consolidation that saw the position of the big four banks apropos or relative to the regional banks and the non-bank financial institutions ... move any further away."The ACCC allowed Westpac to buy St George Bank, a decision taken in mid 2008, and then also allowed Commonwealth Bank to buy Bank of Western Australia, a decision taken in a hurry in late 2008 and under plenty of encouragement from other financial regulators to allow the merger to proceed in the interests of the stability of the banking system.The federal government also needs to put in place policies to boost competition in the financial sector as Australia exits the financial crisis, Samuel said."What we are seeing is that the big four banks are becoming more dominant - the gap between their role in the banking system and in the financial sector and the role of the regional banks is growing."The role of the big four banks is becoming so much more significant that the regional banks are becoming more niche, and potentially diminishing, and the role of the non-bank financial institutions has all but disappeared (and) gone into hibernation at the present time."Business Spectator