Banks (Shareholdings) Regulations (Amendment)

Overview

The Banks (Shareholdings) Regulations (Amendment) 1985 was enacted to address the issue of controlling share ownership in Australian banks, specifically in relation to Citibank Savings Limited, a subsidiary of Citibank Limited. This amendment to the existing Banks (Shareholdings) Act 1972 was introduced to allow for specific exceptions to the general shareholding limits, thereby enabling certain entities to hold a higher percentage of voting shares in the bank. The Act was enacted by the Parliament of Australia with the aim of maintaining financial stability by regulating the concentration of share ownership in Australian banks. This amendment was necessary to accommodate the unique circumstances of Citibank Savings Limited, allowing it to operate under specific conditions that would not be applicable to other banks.

Scope and Application

The Banks (Shareholds) Act 1972 governs the shareholding limits for banks incorporated in Australia, applying to both natural and legal persons, including corporations, to control the amount of voting shares they may hold in Australian banks. The Act specifically restricts the nominal amount of voting shares that a person, including a corporation, can hold in a bank to 10% of the total nominal amount, or 15% with the approval of the Treasurer. The Act applies across the Commonwealth of Australia, covering all banks incorporated within its jurisdiction. However, the Act provides for exceptions through instruments published in the Gazette, where the Governor-General may fix a higher percentage for specific persons, as seen in the case of Citibank Savings Limited and its related entities. The Banks (Shareholds) Regulations further extend the application of the Act by prescribing classes of persons whose interests in shares are deemed to be held by others, thereby disregarding their holdings for the purposes of the shareholding limit. The recent amendments to the Regulations have added several corporations to the Schedule, ensuring their interests in Citibank Savings Limited are also disregarded under the Act.

Key Provisions

The Banks (Shareholdlings) Regulations (Amendment) 2004 amend the Banks (Shareholdings) Regulations to include Citibank Savings Limited, a wholly owned subsidiary of Citibank Limited, in the list of banks whose shareholdings are regulated under the Banks (Shareholdlings) Act 1972. Section 10 of the Act generally limits the nominal amount of voting shares of an Australian incorporated bank that a person may hold to 10% of the total nominal amount, or 15% with the Treasurer's approval. However, the Governor-General can fix a higher percentage by instrument published in the Gazette (section 10(4)). The Regulations provide that where a percentage is fixed for a person, they cannot hold more shares than that percentage (section 10(3)). The Regulations also deem the associates of the companies to have the same interest in Citibank Savings Limited as the companies themselves (section 9). The Regulations impose obligations on the parties governed by them to ensure compliance with the shareholding limits set out in the Act. The companies and their associates must not hold more than the percentage fixed for them by the instrument published in the Gazette. The Regulations also require the companies to apply to the Treasurer for a 'class' instrument fixing a percentage for their officers, pursuant to section 10(5A) of the Act. The effect of the amendments to the Regulations is to disregard the interests of the associates of the companies other than for the relevant officers, as it is not possible to make a 'class' instrument for such interests (section 17 and paragraph 8(9)(d)). Breach of the shareholding limits set out in the Act can result in civil and criminal consequences. Under section 21 of the Act, a person who contravenes section 10 commits an offence and is liable to a fine of up to 50 penalty units for each contravention. In the case of a continuing failure to comply, the fine is up to 10 penalty units for each day during which the contravention continues. Under section 22 of the Act, a corporation that contravenes section 10 is liable to a fine of up to 500 penalty units. The maximum penalties are increased where the contravention is wilful. The Act also provides for the appointment of an inspector to investigate contraventions and for the inspector to have certain powers of entry, examination and information (sections 23-26).