EXPLANATORY STATEMENT
STATUTORY RULES 1990 NO. 469
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 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, fix a higher percentage for that person by an instrument published in the Gazette. Subsection 10(5A) provides 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, for the purposes of subsection (3), 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. Subsection 10(3) provides that where such percentage is applicable to a person, that person may not hold a greater nominal amount of shares than the percentage so fixed.
Section 17 of the Act provides that the Governor-General may make regulations for the purposes of the Act.
As required by the Act an instrument has been gazetted which fixes a percentage of 100% under subsection 10(4) for the Australia and New Zealand Banking Group Limited (ANZ) in relation to its interests in the National Mutual Royal Bank Limited (NMRB) and the National Mutual Royal Savings Bank Limited (NMRSB).
Under section 9 of the Act the associates (including all officers, partners, subsidiaries and related companies) of ANZ would also be deemed to have the same interest in NMRB and NMRSB as ANZ. In the case of officers of ANZ, an instrument has been gazetted pursuant to subsection 10(5A) of the Act which would fix a percentage of 100% in relation to interests in NMRB and NMRSB for those persons who are from time to time relevant officers of ANZ.
Under the Act, it is not possible to make a ‘class’ instrument for the interests of the associates of ANZ 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 NMRB and NMRSB arising from associate relationships with ANZ.
The detail of the proposed Regulation is as follows:
The Schedule to the Banks (Shareholdings) Regulations is amended by deleting the following corporations in relation to National Mutual Royal Bank Limited and National Mutual Royal Savings Bank Limited:
the National Mutual Life Association of Australasia Limited;
the Royal Bank of Canada; and
RBC Australia Holdings Limited;
and replacing them with
the Australia and New Zealand Banking Group Limited.
Overview
The Banks (Shareholdlings) Regulations (Amendment) Statutory Rules 1990 No. 469 were issued under the authority of the Treasurer to address a specific gap in the Banks (Shareholdlings) Act 1972. This legislation allows the Governor-General to set a maximum percentage of voting shares a person or corporation can hold in a bank, with the ability to increase this percentage with the Treasurer's approval. However, the Act did not provide a mechanism to address the interests of a large and dynamic group of associates of a bank, such as the Australia and New Zealand Banking Group Limited in relation to National Mutual Royal Bank Limited and National Mutual Royal Savings Bank Limited. This necessitated the creation of regulations to disregard these interests for the purposes of the Act, as stipulated in section 17 and paragraph 8(9)(d). The proposed amendments to the Banks (Shareholdlings) Regulations aim to streamline the regulatory process by specifically addressing the interests arising from the associate relationships of ANZ with NMRB and NMRSB, thus enhancing the efficiency and clarity of the legislative framework.
Scope and Application
The Banks (Shareholdlings) Act 1972 regulates the shareholdings of banks in Australia, particularly the voting shares held by individuals and corporations. Under the Act, the nominal amount of voting shares a person may own in a bank is capped at 10 per cent, or 15 per cent with the approval of the Treasurer. The Act applies to all persons and entities, including corporations, that hold shares in an Australian bank. The regulations provide mechanisms for the Governor-General to set higher percentages for specific entities or individuals through gazetted instruments and can also apply these percentages to relevant officers of a corporation. The Act’s jurisdiction extends across the Commonwealth of Australia, ensuring uniform regulation of bank shareholdings. The Banks (Shareholdings) Regulations (Amendment) further refines these provisions by prescribing specific interests in certain banks, effectively disregarding certain shareholdings for the purposes of the Act. These amendments, in particular, address the interests arising from associations with the Australia and New Zealand Banking Group Limited, thus providing a tailored regulatory approach to complex shareholding structures.
Key Provisions
The Banks (Shareholdlings) Regulations (Amendment) Statutory Rules 1990 No. 469 amend the Banks (Shareholdlings) Regulations to alter the way certain shareholdings are treated under the Banks (Shareholdlings) Act 1972. Specifically, Section 10 of the Act limits the voting share percentage of a bank that a person may own to 10% or 15% with the Treasurer’s approval. The Governor-General may set a higher percentage for specific individuals or corporations via an instrument published in the Gazette. In the case of ANZ, the Australia and New Zealand Banking Group Limited, a special instrument has set the shareholding percentage at 100% for their interests in the National Mutual Royal Bank Limited and the National Mutual Royal Savings Bank Limited.
The Act also stipulates that ANZ’s associates, including all officers, partners, subsidiaries, and related companies, are considered to have the same interests in these banks as ANZ. For ANZ officers, a separate instrument has been issued to set the shareholding percentage at 100% for their interests in the banks. However, the Act does not allow for a ‘class’ instrument to cover the interests of all ANZ associates beyond its relevant officers, given the large and ever-changing nature of this group. Therefore, these interests are to be disregarded under the Act through regulation, as stipulated in Section 17 and paragraph 8(9)(d).
The obligations imposed by the Act on ANZ and its associates include adhering to the shareholding limits set forth in the Act and any subsequent instruments. ANZ and its associates must not hold more voting shares than the percentage fixed by the Governor-General. The amendments to the Regulations serve to clarify and streamline the application of these provisions, ensuring that the interests of ANZ and its associates are accurately reflected and managed within the framework of the Act.
Failure to comply with the provisions of the Banks (Shareholdlings) Act 1972 and the accompanying Regulations can result in significant consequences. While the Act does not explicitly state penalties for breaches, contravention of the Act or Regulations could potentially lead to civil or criminal liability, including fines and imprisonment, depending on the severity of the breach. The precise penalties would be determined by the relevant courts, but the overarching objective is to maintain the stability and integrity of the banking sector by enforcing these shareholding limits.