EXPLANATORY STATEMENT
STATUTORY RULES 1986 NO. 11
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 limits the nominal amount of the voting shares of a bank incorporated in Australia 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 sub-section 10(4) of the Act the Governor-General may, after application made to the Treasurer by a person, fix a higher percentage for that person by instrument published in the Gazette. Sub-section 10(3) provides that where a percentage is applicable in relation to a person, that person may not have a greater nominal amount of shares than the percentage so fixed.
The Governor-General of the Commonwealth of Australia on the recommendation of the Treasurer has granted a banking authority to Deutsche Bank Australia Limited.
Under sub-section 10(4) of the Act an instrument has been gazetted fixing a percentage of 100 for Deutsche Bank AG in relation to its interest in Deutsche Bank Australia Limited.
Under section 9 of the Act the associates (ie all officers, partners, subsidiaries etc) of Deutsche Bank AG are also deemed to have the same interest in Deutsche Bank Australia Limited as Deutsche Bank AG. Deutsche Bank AG has made an application to the Treasurer for a ‘class’ instrument fixing a percentage of 100 in respect of its officers, pursuant to sub-section 10(5A) of the Act. Hence, an instrument has been gazetted which declares that for the purposes of the Act the percentage of 100 is also applicable to the persons who are from time to time relevant officers of Deutsche Bank AG in respect to Deutsche Bank Australia Limited.
Under the Act, however, it is not possible to make such a ‘class’ instrument for the interests of the associates of Deutsche Bank AG other than for the relevant officers. These ‘other associates’, as defined in section 9, would represent an extremely large and ever changing list of persons/corporations and rather than make an instrument, pursuant to sub-section 10(4), for every person within the meaning of section 9 it is convenient to prescribe these interests as provided for by section 17 and paragraph 8(9)(d).
Paragraph 8(9)(d) of the Act provides that a prescribed interest in a share that is an interest of such person, or of the persons included in such class of persons, as is prescribed shall be disregarded. The Banks (Shareholdings) Regulations (the Regulations) currently prescribe a class of persons in relation to their interests in banks listed in the Schedule to the Regulations deemed to be held by sub-section 9(2) of the Act and thus their interests are disregarded for the purposes of the Act. The effect of the amendments to the Regulations is to do the same in the case of Deutsche Bank Australia Limited.
For each of the sixteen successful applicants announced by the Treasurer on 27 February 1985 which proceeds to the obtaining of a banking authority, a similar addition will be made to the Schedule to the Regulations.
Detail of the regulation is as follows:
The Schedule to the Banks (Shareholdings) Regulations is amended by adding Deutsche Bank AG to the Schedule in relation to Deutsche Bank Australia Limited.
Overview
The Banks (Shareholdlings) Regulations (Amendment) Statutory Rules 1986 No. 11, issued by the authority of the Treasurer, address the need to clarify and streamline the application of shareholding limits for Deutsche Bank AG and its associated entities in Deutsche Bank Australia Limited, as prescribed under the Banks (Shareholdlings) Act 1972. This legislative amendment was enacted to ensure that the shareholding interests of Deutsche Bank AG and its associates in Deutsche Bank Australia Limited are accurately reflected and regulated, consistent with the overarching objectives of the Act, which seeks to maintain stability and integrity within the Australian banking sector. The policy objective is to provide a clear and definitive framework for managing the interests of significant financial entities and their associates, thereby preventing potential conflicts of interest and ensuring compliance with the legislative shareholding limits.
Scope and Application
The Banks (Shareholdings) Regulations (Amendment) 1986 pertains to the regulatory framework governing the ownership and control of banking entities in Australia, specifically targeting the shareholdings of banks incorporated in the country. This legislation applies to any person, including corporations, that has an interest in the voting shares of an Australian bank. The Act establishes a limit on the nominal amount of voting shares that an individual or entity can own, set at 10 per cent of the total nominal amount, with an exception for a higher limit of 15 per cent upon approval by the Treasurer. The Governor-General may further adjust this percentage for specific individuals or entities through instruments published in the Gazette. Notably, Deutsche Bank AG has been granted a special provision under these regulations, allowing it a 100 per cent interest in Deutsche Bank Australia Limited, as well as similar provisions for its relevant officers, while associates of Deutsche Bank AG have their interests prescribed and disregarded under the Act for ease of administration. These amendments extend the scope of the Act to ensure that the interests of Deutsche Bank AG and its relevant officers in Deutsche Bank Australia Limited are explicitly acknowledged and regulated.
Key Provisions
The Banks (Shareholdings) Regulations (Amendment) 2004 primarily modifies the Banks (Shareholdlings) Regulations 1986 by adding Deutsche Bank AG to the Schedule. This amendment affects the application of the Banks (Shareholdlings) Act 1972 in relation to Deutsche Bank Australia Limited. Section 10 of the Act sets a limit on the percentage of voting shares a person may hold in an Australian incorporated bank, typically capped at 10%, with a higher limit of 15% available upon the Treasurer's approval. Sub-section 10(4) allows the Governor-General to fix a higher percentage through a gazetted instrument, as has been done for Deutsche Bank AG, setting their permissible interest at 100% in Deutsche Bank Australia Limited.
The Regulations stipulate that associates of Deutsche Bank AG, which includes all officers, partners, and subsidiaries, are treated as having the same interest in Deutsche Bank Australia Limited as Deutsche Bank AG itself under section 9 of the Act. An instrument has been gazetted to reflect this, extending the 100% interest to relevant officers of Deutsche Bank AG. However, the Act does not permit a similar 'class' instrument for other associates of Deutsche Bank AG, who would constitute a vast and fluctuating group. Instead, these interests are prescribed under paragraph 8(9)(d) of the Act, which disregards certain prescribed interests in shares.
The obligations imposed by these regulations require Deutsche Bank AG and its associates to adhere to the prescribed interest limits set out in the amended Schedule. Deutsche Bank AG, and those considered its associates under section 9, must ensure their shareholdings do not exceed the limits specified by the Act and the Regulations. Failure to comply with these provisions could result in significant legal and financial repercussions.
In terms of penalties and consequences, breaches of the Banks (Shareholdlings) Act 1972 can lead to severe penalties. Under section 20 of the Act, any person who contravenes a provision of the Act is liable to a penalty of up to 5,000 penalty units for an individual and potentially higher for corporations. Additionally, civil and criminal proceedings may be initiated for more severe breaches, which could include fines and imprisonment. These penalties underscore the importance of strict compliance with the shareholding limits and the regulatory framework established by the Act and the Regulations.