Pacific to bank on ANZ thanks to Australian guarantee

ANZ has struck a deal with the Australian government to guarantee banking services in the Pacific.

Australia has been working with commercial banks to stop an exodus of financial services from Pacific island nations, which aren't profitable.

There have been concerns a vacuum could lead to Chinese state-linked banks filling the void.

This could result in a dependency on China, meaning nations could become susceptible to pressure or influence out of Beijing, China expert Ben Herscovitch said.

Australia will provide a $2 billion guarantee to ANZ's Pacific operations over 10 years, and that comes with an annual payment from the bank to the federal government.

It's set to commence in the second half of 2025.

The bank will invest a further $50 million into its Pacific banking systems to enhance digital services and continue its fee-free offering for international money transfers into the region over the life of the guarantee.

It has operations in eight Pacific nations and East Timor.

"While doing business in the Pacific can be complex, we're committed to our role in advancing economic development, critical infrastructure and payment networks across the region," ANZ CEO Shayne Elliott said in a statement on Friday.

"We will continue to connect Pacific customers to trade and investment opportunities."

The bank says it employs 1200 people across the region and has put $95 million into buildings, systems and technology over the past five years.

Australia has also guaranteed Nauru's banking services as part of an agreement that gives it the power to essentially veto it entering other security arrangements.

Commonwealth Bank will provide banking services in the small island nation from 2025 after Bendigo Bank departs.

It comes as Australia works to lock out Chinese influence in the Pacific as Beijing searches for more footholds after signing security and policing pacts with some nations.