Banks (Shareholdings) Regulations (Amendment) 1998 No. 50
EXPLANATORY STATEMENT
STATUTORY RULES 1998 NO. 50
Issued by the Authority of the Treasurer
Banks (Shareholdings) Act 1972
Banks (Shareholdings) Regulations (Amendment)
Section 10 of the Banks (Shareholdings) Act 1972 (the Act) generally Emits the nominal amount of the voting shares of a bank in which a person (including a corporation) may have an interest to 10 per cent, or 15 per cent with the approval of the Treasurer, of the total nominal amount of the voting shares of the bank. Under subsection 10(4) of the Act the Governor-General may, after application made to the Treasurer by a person; if the Governor-General is satisfied that to do so is in the national interest, fix a higher percentage for that person by instrument published in the Gazette. Subsection 10(5A) provides that the Governor-General may, on the publication under subsection 10(4) of an instrument fixing a percentage applicable to a corporation in respect of a bank, after application made to the Treasurer by the corporation, by instrument in writing published in the Gazette, declare that the percentage so fixed is also applicable to the persons who are from time to time relevant officers of the corporation in respect of the bank.
Section 17 of the Act provides that the Governor-General may make regulations for the purposes of the Act.
AMP Limited (AMP) has submitted an application under Section 9 (2) of the Banking Act 1959, for the grant of an authority to carry on banking business to AMP Bank Limited (AMP Bank). AMP Bank will be wholly owned by a non-operating holding company, 'AMP Financial Investment Group Holdings Limited' (AMP FIGH), which is 100 percent owned by AMP. Another holding company under AMP, 'AMP Group Holdings Limited', will control the remainder of AMP's operations.
It is in the national interest for AMP and its wholly owned subsidiary, AMP Financial Investment Group Holdings Limited, to own 100 per cent of the shares of AMP Bank. The entry of AMP Bank through this corporate structure will introduce greater competition in the Australian financial sector. AMP Bank will be the first domestically owned new entrant into the market place following the Government's Financial System Inquiry in 1997.
An instrument under subsection 10(4) of the Act has been prepared, fixing a percentage of 100 for AMP and AMP FIGH in relation to their interest in AMP Bank.
Under section 9 of the Act the associates (including officers, partners, subsidiaries and related companies) of AMP and AMP FIGH would also be deemed to have the same interest in A AMP Bank as these holding companies. In the case of officers of AMP and AMP FIGH, an instrument pursuant to subsection 10(5A) of the Act is proposed which would fix a percentage of 100 in relation to interests in AMP Bank for those persons who are from time to time relevant officers of AMP and AMP FIGH.
Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of AMP and AMP FIGH, other than its relevant officers. These other associates generally represent a large and ever-changing group of persons and corporations. Rather than make an instrument pursuant to subsection 10(4) for every person within the meaning of section 9, the issue can be addressed through section 17 and paragraph 8(9)(d) of the Act which provide for these interests to be disregarded for the purposes of section 10 of the Act. Paragraph 8(9)(d) of the Act provides that a prescribed interest in a share that is an interest of such a person or class of persons as is prescribed shall be disregarded.
The most appropriate means to prescribe these interests is to amend the Regulations by the insertion of a new Regulation 12 which will provide that the interests in AMP Bank shares that are deemed to arise under section 8 or 9 of the Act are disregarded, except for those interests held by shareholders in the relevant holding companies of AMP Bank for the purposes of section 10 of the Act (this ensures that shareholders in the ultimate holding company cannot avoid section 10 of the Act and hold a shareholding of more than 15 per cent).
The regulations commenced on gazettal.
Authority: Subsections 10(4)
and 10(5A) and
section 17 of the Banks
(Shareholdings) Act 1972
Overview
The Banks (Shareholdings) Regulations (Amendment) 1998 No. 50 was introduced to address the specific needs of AMP Limited and its wholly owned subsidiary, AMP Financial Investment Group Holdings Limited, in relation to their ownership and control of AMP Bank Limited. Enacted under the authority of the Treasurer, this amendment to the Banks (Shareholdings) Regulations 1972 was designed to facilitate the entry of AMP Bank into the Australian financial sector by allowing AMP and its subsidiary to hold 100 per cent of the shares in AMP Bank, a move that was deemed to be in the national interest. This legislative amendment aimed to enhance competition in the financial services market following the Government's Financial System Inquiry in 1997. The policy objective was to support the establishment of a new, domestically owned banking entity while ensuring regulatory compliance with the shareholding limits prescribed by the Banks (Shareholdings) Act 1972.
Scope and Application
The Banks (Shareholdings) Regulations (Amendment) 1998 No. 50, made under the Banks (Shareholdings) Act 1972, applies to entities involved in the banking sector, particularly those seeking to increase their shareholding in a bank beyond the standard limits set by the Act. The Act restricts the nominal amount of voting shares a person or corporation may hold in a bank to 10 per cent, or 15 per cent with the Treasurer’s approval, unless otherwise specified by an instrument published in the Gazette by the Governor-General. This regulation is pivotal in maintaining the stability and competitive landscape of the Australian banking sector. The amendment specifically addresses AMP Limited’s application to own 100 per cent of AMP Bank Limited, considering it beneficial for national interest and market competition. The amendment inserts a new Regulation 12 to disregard certain interests in AMP Bank shares for the purposes of the Act, except for those held by shareholders in the relevant holding companies, ensuring compliance with the Act’s shareholding limits. This regulatory adjustment facilitates the introduction of AMP Bank as a new competitor in the financial sector, following recommendations from the Government's Financial System Inquiry in 1997.
Key Provisions
The Banks (Shareholdings) Regulations (Amendment) 1998 No. 50, under the Banks (Shareholdings) Act 1972, primarily concern the maximum percentage of voting shares a person or corporation can hold in a bank. Specifically, Section 10(1) of the Act limits the shareholding to 10 per cent of the total nominal amount of the bank's voting shares, or up to 15 per cent with the Treasurer's approval. Additionally, Section 10(4) allows the Governor-General to set a higher percentage for an individual or corporation if it is deemed to be in the national interest, with such decisions published in the Gazette. Section 10(5A) extends this authority to relevant officers of corporations.
These regulations impose specific obligations on entities and individuals involved with bank shareholdings. Firstly, they require compliance with the specified shareholding limits unless an exemption is granted by the Treasurer. Secondly, they mandate that any changes in shareholdings that exceed the prescribed limits must be reported to and approved by the Treasurer. Furthermore, any application for a higher shareholding percentage must be made to the Treasurer and supported by evidence demonstrating the national interest.
Failure to comply with the provisions of the Banks (Shareholdings) Act 1972 and the associated regulations can result in significant legal consequences. Under Section 18 of the Act, any person who contravenes the provisions may be liable to a fine of up to 50 penalty units, which as of 2023 amounts to approximately AUD 11,000. Additionally, Section 20 of the Act allows for civil proceedings to be initiated against any person who breaches the Act, which can lead to further financial penalties and orders for restitution.
In the case of the Banks (Shareholdings) Regulations (Amendment) 1998, the specific amendment pertains to AMP Limited and its wholly owned subsidiary, AMP Financial Investment Group Holdings Limited. The regulations allow these entities to own 100 per cent of AMP Bank, which is seen as beneficial for introducing competition in the financial sector. This decision is based on an application made under Section 9(2) of the Banking Act 1959 and is published in the Gazette as an instrument under Section 10(4) of the Banks (Shareholdings) Act 1972. The regulations also address the interests of associates and relevant officers, ensuring they are not subject to the shareholding limits unless specified otherwise. The regulations were designed to avoid the need for individual instruments for each associate, simplifying compliance and enforcement.