Banks (Shareholdings) Regulations (Amendment) 1995 No. 415
EXPLANATORY STATEMENT
STATUTORY RULES 1995 No. 415
Issued by the Authority of the Assistant 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 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 subsection 10(4) of the Act the Governor-General may, after application made to the Treasurer by a person, if the Governor-General is satisfied that to do so is in the national interest, fix a higher percentage for that person by instrument published in the Gazette. Subsection 10(5A) provides that the Governor-General may, on the publication under subsection 10(4) of an instrument fixing a percentage applicable to a corporation in respect of a bank, after application made to the Treasurer by the corporation, by instrument in writing published in the Gazette, declare that the percentage so fixed is also applicable to the persons who are from time to time relevant officers of the corporation in respect of the bank.
Section 17 of the Act provides that the Governor-General may make regulations for the purposes of the Act.
Lloyds Bank NZA Limited (Lloyds NZA) has an authority under section 9 of the Banking Act 1959 to carry on a banking business, and is a wholly owned subsidiary of Lloyds Bank Plc (Lloyds). Lloyds and TSB Group Plc (TSB) recently announced an intention to merge. The proposed merger will involve the cancellation of Lloyds' present issued share capital and the issue of new Lloyds' shares to the ultimate parent company of TSB, which will subsequently be renamed Lloyds TSB Group Plc. This merger will result in TSB holding, albeit indirectly, the whole of the issued shares of Lloyds NZA.
Lloyds NZA will remain as a separate entity with its own banking authority, and is expected to continue to operate substantially as at present. Lloyds NZA perceive, however, that competitive advantages will accrue from membership of an enlarged group.
To reflect the ownership by TSB of 100 per cent of Lloyds NZA, an instrument will be gazetted in accordance with the Act, effectively fixing a percentage of 100 under subsection 10(4) for TSB in relation to its interest in Lloyds NZA.
Under section 9 of the Act the associates (including officers, partners, subsidiaries and related companies) of TSB would also be deemed to have the same interest in Lloyds NZA as that corporation. In the case of officers of TSB, an instrument pursuant to subsection 10(5A) of the Act is proposed which would fix a percentage of 100 in relation to interests in Lloyds NZA for those persons who are from time to time relevant officers of TSB.
Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of TSB, other than its relevant officers. These other associates represent a large and ever-changing group of persons and corporations.
Rather than make an instrument pursuant to subsection 10(4) for every person within the meaning of section 9, it is convenient to prescribe these interests - that is, to have them disregarded for the purposes of section 10 of the Act - by regulation, 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 a person or 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 an associate relationship. The effect of the proposed amendments to the Regulations would be to disregard, for the purposes of the Act, interests in Lloyds NZA arising from associate relationships with TSB. For the purposes of paragraph 8 (9) (d), the list of prescribed interests in both Lloyds NZA and Macquarie Bank Limited has been extended to allow for the deeming provisions of s. 8 (4) (c) of the Act.
The details of the proposed Regulations are as follows:
The Schedule to the Banks (Shareholdings) Regulations (item 17) is amended by adding the following corporation to column 3:
TSB Group Plc.
Overview
The Banks (Shareholdings) Regulations (Amendment) 1995 No. 415 were enacted to address the ownership restructuring of Lloyds NZA following a proposed merger between Lloyds Bank Plc and TSB Group Plc. The Banks (Shareholdings) Act 1972, enacted by the Australian Parliament, generally limits the nominal amount of voting shares of a bank in which an individual or corporation may have an interest, except with approval from the Treasurer. This regulation seeks to modify the existing regulatory framework to accommodate the proposed merger, ensuring the continuity of Lloyds NZA's operations while reflecting TSB's complete ownership. The amendments to the regulations disregard interests in Lloyds NZA arising from associate relationships with TSB, aligning with the policy objective of maintaining financial stability and orderly ownership within the banking sector.
Scope and Application
The Banks (Shareholdings) Regulations (Amendment) 1995 No. 415, under the Banks (Shareholdings) Act 1972, applies to individuals and entities with interests in the voting shares of banks, specifically targeting Lloyds Bank NZA Limited (Lloyds NZA) in this instance. The Act sets a limit on the nominal amount of voting shares that a person or corporation can own in a bank, generally set at 10 per cent, or 15 per cent with the approval of the Treasurer. The Act also allows for the Governor-General to fix a higher percentage for certain persons if deemed to be in the national interest. In the context of the merger between Lloyds Bank Plc and TSB Group Plc, where TSB is set to hold 100 per cent of Lloyds NZA, the Regulations amend the Schedule to disregard interests in Lloyds NZA arising from associate relationships with TSB, thereby effectively excluding these interests from the application of the shareholding limits. This amendment is made to streamline the regulatory process, avoiding the need for individual instruments for every associate of TSB. The changes extend to the prescribed interests in Lloyds NZA and Macquarie Bank Limited, aligning with the deeming provisions of the Act.
Key Provisions
The Banks (Shareholdings) Regulations (Amendment) 1995 No. 415 propose amendments to the Banks (Shareholdings) Regulations under the Banks (Shareholdings) Act 1972 (the Act). The main operative sections in this context are sections 10 and 17 of the Act. Section 10 generally restricts the nominal amount of voting shares a person can hold in a bank to 10% of the total, or 15% with the Treasurer's approval. The Governor-General may set a higher percentage in the national interest, as specified in subsection 10(4). This is relevant because the amendment aims to fix the percentage of TSB's interest in Lloyds NZA at 100%, given TSB's ownership of 100% of Lloyds NZA post-merger. Subsection 10(5A) also allows the Governor-General to extend this percentage to relevant officers of the corporation, in this case, TSB.
The Banks (Shareholdings) Regulations (Amendment) 1995 No. 415 impose specific obligations on TSB and Lloyds NZA. The Act mandates that TSB's 100% interest in Lloyds NZA be fixed by an instrument published in the Gazette, as per subsection 10(4). The amendment ensures that this percentage is acknowledged and applied accordingly. Additionally, it requires the relevant officers of TSB to also have their interests fixed at 100% for Lloyds NZA under subsection 10(5A). The proposed regulation further extends these interests to be disregarded for the purposes of section 10 of the Act, which is facilitated by paragraph 8(9)(d). This ensures that the interests of associates of TSB, apart from relevant officers, are effectively managed and accounted for in the context of the shareholding limits set by the Act.
The Banks (Shareholdings) Act 1972 does not explicitly outline specific offences or penalties for breaches within the context of the proposed amendments. However, the implications of not adhering to the prescribed regulations could potentially lead to legal repercussions. The failure to comply with the shareholding limits and the subsequent requirements to fix and publish the necessary instruments could result in legal challenges or regulatory actions against the involved parties. The penalties for such breaches would typically be determined by the courts based on the specific circumstances and the nature of the non-compliance.
In summary, the Banks (Shareholdings) Regulations (Amendment) 1995 No. 415 seek to adjust the regulatory framework concerning the shareholding interests of TSB in Lloyds NZA, ensuring alignment with the provisions of the Banks (Shareholdings) Act 1972. By amending the Regulations, the Act's requirements are met, and the interests of the relevant parties are duly recognised and managed within the legislative constraints.