EXPLANATORY STATEMENT
STATUTORY RULES 1986 NO 24
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, in a form suitable for a savings bank, to National Mutual Royal Savings Bank Limited, a wholly owned subsidiary of National Mutual Royal Bank Limited.
As required by the Act an instrument has been gazetted which separately but not cumulatively fixes a percentage of 100 under sub-section 10(4) for each of the following corporations in relation to their interests in National Mutual Royal Savings Bank Limited:
• National Mutual Royal Bank Limited
• RBC Australia Holdings Limited
• The National Mutual Life Association of Australasia Limited
• The Royal Bank of Canada.
Under section 9 of the Act the associates (ie all officers, partners, subsidiaries etc) of the above corporations are deemed to have the same interest in National Mutual Royal Savings Bank Limited as the above-mentioned companies. The companies have made an application to the Treasurer for a ‘class’ instrument fixing a percentage of 100 in respect of their 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 the above corporations in respect to National Mutual Royal Savings Bank Limited.
Under the Act, however, it is not possible to make such a ‘class’ instrument for the interests of the associates of those corporations other than 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 the banks listed in
the schedule to the Regulations, where those interests are deemed to be held by virtue of sub-section 9(2) of the Act, that is by virtue of an associate relationship. The effect of the Regulation is that these 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 National Mutual Royal Savings Bank Limited.
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 National Mutual Royal Savings Bank Limited:
• National Mutual Royal Bank Limited
• RBC Australia Holdings Limited
• The National Mutual Life Association of Australasia Limited
• The Royal Bank of Canada.
Overview
The Banks (Shareholdings) Regulations (Amendment) 2004 (C2004L00972) was enacted to address the issue of shareholding limits in Australian banks, specifically in relation to National Mutual Royal Savings Bank Limited. The 1972 Banks (Shareholdings) Act generally restricts the nominal amount of voting shares a person or corporation can own in an Australian incorporated bank to 10 per cent, or 15 per cent with the Treasurer's approval. The Regulations were introduced to amend the existing Banks (Shareholdings) Regulations to provide flexibility in the application of these shareholding limits. The policy objective was to ensure that the interests of relevant officers and associates of certain corporations in National Mutual Royal Savings Bank Limited are appropriately accounted for under the Act, without the need for individual instruments for each associate. This was achieved by prescribing these interests under the Act, thereby disregarding them for the purposes of the shareholding limits. The Regulations were issued by the authority of the Treasurer and represent a practical approach to managing the complex shareholding structures within the banking sector.
Scope and Application
The Banks (Shareholdings) Act 1972, along with its amendments and associated regulations, governs the shareholding limits for banks incorporated in Australia. The Act applies to any person, including corporations, that hold shares in a bank, effectively restricting the nominal amount of voting shares an entity can possess to 10 per cent of the total unless the Treasurer approves a higher percentage. The Act’s jurisdiction is national, applying across Australia, and it extends to various entities such as banks, corporations, and their officers and associates, as defined in section 9 of the Act. The Banks (Shareholdings) Regulations further refine these provisions, notably through the Banks (Shareholdings) Regulations (Amendment) which adjust the prescribed interests for certain corporations in relation to their holdings in specific banks. The Regulations also allow for certain interests to be disregarded under section 17 and paragraph 8(9)(d) of the Act, effectively streamlining the application of the shareholding limits by not counting prescribed interests in certain circumstances.
Key Provisions
The Banks (Shareholdings) Regulations (Amendment) introduces amendments to the existing Banks (Shareholdings) Regulations, specifically concerning the share ownership limits in National Mutual Royal Savings Bank Limited. Under section 10(4) of the Banks (Shareholdings) Act 1972, the Governor-General, on the recommendation of the Treasurer, has the authority to fix a higher percentage of voting shares for specific corporations, as outlined in the gazetted instrument. This amendment fixes a percentage of 100 for National Mutual Royal Bank Limited, RBC Australia Holdings Limited, The National Mutual Life Association of Australasia Limited, and The Royal Bank of Canada in relation to their interests in National Mutual Royal Savings Bank Limited. Additionally, pursuant to section 10(5A), a separate instrument has been gazetted to include the relevant officers of these corporations, ensuring they also have a 100 per cent interest.
These regulations impose specific obligations on the parties involved, particularly the corporations listed. They must adhere to the fixed percentage limits as stipulated by the gazetted instruments, which are designed to prevent any individual or entity from exceeding the allowed shareholding percentage. This requirement ensures that the specified corporations and their relevant officers can hold up to 100 per cent of the voting shares in National Mutual Royal Savings Bank Limited without breaching the Act. The associates of these corporations, other than the relevant officers, are also subject to the Act’s provisions but are not covered by the class instrument and instead are disregarded under paragraph 8(9)(d).
Failure to comply with the provisions of the Banks (Shareholdings) Act 1972 and the amended regulations could result in various consequences. The Act does not explicitly state civil or criminal penalties for breaches, but non-compliance could lead to legal action to enforce the share limits or other regulatory sanctions. Corporations and individuals who exceed the permitted shareholding percentages may face orders from the court to divest excess shares, and ongoing non-compliance could result in further legal or regulatory penalties. The precise consequences would depend on the specific circumstances and the interpretation by relevant authorities.