The Australian Competition and Consumer Commission (ACCC) says competition issues have emerged from its initial inquiries into the proposed $16 billion takeover of St George Bank Ltd by Westpac Corp.
The watchdog is now calling for further submissions from the market about the deal, after releasing a statement of issues on Wednesday.
"The statement of issues seeks further information on certain competition issues which have arisen from the ACCC's market inquiries to date," it said.
Westpac on Wednesday said that the ACCC's preliminary conclusion was a merger was unlikely to raise competition concerns in most markets, including personal, business, institutional and corporate banking and insurance.
"Westpac will work closely with the ACCC through to the conclusion of the process and is confident that it will satisfactorily address any remaining issues," it said.
St George, Australia's fifth largest bank, said the statement of issues was an important step in the merger process.
"We look forward to working with the ACCC to resolve the issues raised," it added.
In May, Westpac and St George Bank signed an implementation agreement to pursue a merger.
Westpac is offering 3.1 of is shares for each St George share.
St George intends to recommend the offer, pending an independent expert's report concluding it is in the best interests of its shareholders.
St George shareholders will receive a scheme booklet, including the report, in October.
Australia's third largest bank Westpac says buying St George will give it 10 million customers including businesses and 1,200 branches nationwide.
The ACCC has invited further submissions from the market by August 6, ahead of its final decision on August 20.