EXPLANATORY STATEMENT
STATUTORY RULES 1985 NO 376
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 Mitsubishi Bank of Australia Limited.
As required by the Act an instrument has been gazetted fixing a percentage of 77.5 under sub-section 10(4) for The Mitsubishi Bank, Ltd in relation to its interest in Mitsubishi Bank of Australia Limited. The Treasurer has, under sub-section 10(2) of the Act, exempted The City Mutual Life Assurance Society Limited in relation to its interest in Mitsubishi Bank of Australia Limited from compliance with sub-section 10(1) so as to allow it to hold a 12.5 per cent interest in the bank.
Under section 9 of the Act the associates (ie all officers, partners, subsidiaries etc) of the above shareholders would also be deemed to have the same interests in Mitsubishi Bank of Australia Limited as those companies. The companies made an application to the Treasurer for ‘class’ instruments fixing the same percentages as for themselves in respect of their officers, pursuant to sub-sections 10(5A) and 10(2B) of the Act. Hence, an instrument has been gazetted which declares that for the purposes of the Act the percentage of 77.5 is also applicable to the persons who are from time to time relevant officers of The Mitsubishi Bank, Ltd. The Treasurer has exempted under sub-section 10(2B) of the Act those persons who are from time to time relevant officers of The City Mutual Life Assurance Society Limited from compliance with sub-section 10(1) of the Act.
Under the Act, however, it is not possible to make such a ‘class’ instrument or exemption for the interests of the associates of those shareholders 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 or exemption, pursuant to sub-sections 10(4) and 10(2), 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 Mitsubishi Bank of 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 the following corporations to the Schedule in relation to Mitsubishi Bank of Australia Limited.
• The City Mutual Life Assurance Society Limited
• The Mitsubishi Bank, Ltd.
Overview
The Banks (Shareholdlings) Regulations (Amendment) 1985, issued under the authority of the Treasurer, addresses the complexities and potential regulatory burdens of applying shareholding limits to a broad and dynamic group of associates connected to major shareholders in Australian banks. Enacted by the Parliament of Australia, the policy objective of the Banks (Shareholdlings) Act 1972 is to regulate the concentration of voting shares in Australian banks to prevent undue influence and maintain financial stability. These regulations amend the Banks (Shareholdlings) Regulations to streamline the process by which certain interests in Mitsubishi Bank of Australia Limited are considered for compliance purposes. By incorporating specific entities into the schedule of prescribed interests, the regulations aim to reduce the administrative load and legal intricacies associated with managing a large and changing group of associates, thereby facilitating smoother regulatory oversight while upholding the core intent of the Act.
Scope and Application
The Banks (Shareholdings) Act 1972 governs the shareholding limits in Australian banks, applying to any person or entity, including corporations, with an interest in the voting shares of a bank incorporated in Australia. This Act restricts the nominal amount of voting shares an individual or entity can own to 10 per cent of the total nominal amount of the voting shares of a bank, with an exception for an increase to 15 per cent subject to approval from the Treasurer. The Act also provides mechanisms for the Governor-General to set a higher percentage for specific persons through a gazetted instrument. The Act's jurisdictional reach is national, encompassing all Australian banks and shareholders regardless of state or territory. Certain entities, such as The Mitsubishi Bank, Ltd and The City Mutual Life Assurance Society Limited, have been granted specific exemptions or higher shareholding limits by the Treasurer, as published in the Gazette. These amendments extend the Act's application to include relevant officers of these exempted entities, ensuring that the prescribed shareholding limits apply uniformly to all associated persons. The Banks (Shareholdings) Regulations further clarify and refine the application of the Act by prescribing specific interests in shares that are disregarded, thereby tailoring the regulatory framework to the unique circumstances of each bank.
Key Provisions
The Banks (Shareholdings) Act 1972 sets out key provisions regarding the shareholding limits of banks incorporated in Australia. Section 10(1) generally restricts any person, including corporations, from having more than 10% of the total nominal value of the voting shares of a bank. However, with the approval of the Treasurer, this limit can be extended to 15%. The Governor-General can also fix a higher percentage through an instrument published in the Gazette under section 10(4). If such a percentage is set, the person must not exceed that limit as per section 10(3).
The Act imposes obligations on shareholders and their associates. Shareholders, which include officers, partners, and subsidiaries, must adhere to the shareholding limits set by the Act. For instance, The Mitsubishi Bank, Ltd., has been granted a specific percentage of 77.5% in relation to Mitsubishi Bank of Australia Limited, as announced in the Gazette. Similarly, The City Mutual Life Assurance Society Limited has been exempted from the general shareholding limits, allowing it to hold up to 12.5% of the bank's shares. These obligations extend to the associates of the shareholders, who must also comply with the prescribed shareholding limits unless specifically exempted.
Any breaches of the Act can result in civil and criminal consequences. While the specific penalties are not detailed in the explanatory statement, it is implied that non-compliance with the shareholding limits or the conditions set by the Treasurer could lead to legal actions. The Act's provisions ensure that the shareholdings in Australian banks are regulated to maintain financial stability and prevent undue concentration of control.
The Banks (Shareholdings) Regulations (Amendment) further clarifies the application of these provisions by specifying the interests of certain entities in Mitsubishi Bank of Australia Limited. The amendment to the Schedule of the Regulations ensures that the interests of The City Mutual Life Assurance Society Limited and The Mitsubishi Bank, Ltd. are explicitly acknowledged and regulated under the Act. This amendment is designed to provide clarity and ensure that the regulatory framework is applied consistently across different banking entities.