Banks (Shareholdings) Regulations (Amendment)

Overview

The Banks (Shareholdings) Regulations (Amendment) 1997 No. 295, issued under the authority of the Assistant Treasurer, amends the Banks (Shareholdings) Regulations to facilitate the proposed merger between Westpac Banking Corporation and Bank of Melbourne Limited. The Banks (Shareholdings) Act 1972 generally restricts the voting share holdings in a bank to 10 per cent of the total nominal amount of the voting shares, with a higher limit of 15 per cent available with the Treasurer's approval. The proposed amendments to the regulations seek to disregard the interests of Westpac's associates in Bank of Melbourne Limited for the purposes of the Act, given that Westpac intends to own up to 100 per cent of BML. The changes are intended to streamline the regulatory process, given the impracticality of individually addressing each associate's interest, and are consistent with the policy objective of facilitating a merger that is deemed to be in the national interest due to anticipated efficiency gains and the provision of legally enforceable undertakings to preserve competition. The regulations were introduced to address the specific issue of managing the shareholding structure during the merger between Westpac and Bank of Melbourne Limited. The amendment aims to ensure that the merger does not contravene the shareholding limits set out in the Banks (Shareholdings) Act 1972, while still allowing for the anticipated benefits of the merger to be realised. The policy objective is to facilitate a merger that is in the national interest, while ensuring that competition is not substantially lessened in the Victorian retail banking market. This is achieved through the proposed amendments, which are designed to align with the legally enforceable undertakings provided by both banks to the Australian Competition & Consumer Commission.

Scope and Application

The Banks (Shareholdings) Regulations (Amendment) 1997 No. 295, issued under the authority of the Assistant Treasurer, amends the Banks (Shareholdings) Regulations to accommodate the merger between Westpac Banking Corporation and Bank of Melbourne Limited. This amendment applies to the entities involved in the merger, including Westpac, its officers, partners, subsidiaries, and related companies, as well as Bank of Melbourne Limited. The Regulations are designed to disregard certain shareholding interests for the purposes of the Banks (Shareholdings) Act 1972, thereby allowing Westpac to own up to 100% of BML, which is deemed to be in the national interest. This amendment allows for the integration of BML's business into Westpac while ensuring that the merger does not substantially lessen competition in the Victorian market for retail banking services, as stipulated in the legally enforceable undertakings provided by both banks. The changes are intended to facilitate the merger while preserving certain competitive safeguards.

Key Provisions

The Banks (Shareholdings) Regulations (Amendment) 1997 No. 295 introduce amendments to the Banks (Shareholdings) Regulations 1972, primarily to facilitate the merger of Westpac Banking Corporation and Bank of Melbourne Limited (BML). Under the original provisions of the Banks (Shareholdings) Act 1972 (section 10), the nominal amount of the voting shares of a bank in which a person, including a corporation, may have an interest is generally limited to 10 per cent, or 15 per cent with the approval of the Treasurer. However, this limit can be set higher by the Governor-General if deemed to be in the national interest (section 10(4)). For the proposed merger, an instrument under subsection 10(4) fixes a percentage of 100 for Westpac in relation to its interest in BML, and a subsequent instrument under subsection 10(5A) fixes a percentage of 100 for relevant officers of Westpac in relation to their interests in BML. The amendments to the Regulations, as outlined in the Schedule, aim to disregard interests in BML arising from associate relationships with Westpac for the purposes of section 10 of the Act. This is achieved by adding Bank of Melbourne Limited to column 2 and Westpac Banking Corporation to column 3 of the Schedule. These changes are made to facilitate the merger while ensuring that the legally enforceable undertakings provided by both banks are met, which are critical to maintaining competitive balance in the Victorian retail banking market. The Regulations impose certain obligations on Westpac and BML, as well as their associates and relevant officers. Specifically, they require Westpac and its associates to adhere to the percentage limits set forth in the instruments published in the Gazette. This means that while Westpac can own 100 per cent of BML, this ownership is subject to regulatory oversight and conditions that ensure the merger benefits are realised without compromising competition. Furthermore, the legally enforceable undertakings provided to the Australian Competition & Consumer Commission must be maintained for three years post-merger, including maintaining local operational autonomy for BML’s CEO, preserving trading hours for at least 100 branches, and ensuring continued access to transaction fee exemptions and EFTPOS and ATM networks. Failure to comply with the provisions of the Banks (Shareholdings) Act 1972 and the subsequent Regulations could lead to civil or criminal penalties. Under section 10 of the Act, any person who contravenes the shareholding limits is liable to a penalty of up to $100,000. Additionally, if the contravention is wilful, the person may also face imprisonment for up to one year. The Regulations, in turn, provide mechanisms to enforce these limits, ensuring that the conditions of the merger are strictly adhered to. The legal framework thus ensures that the merger achieves its intended efficiencies and benefits without leading to monopolistic practices or detriment to competition.