Banks (Shareholdings) Regulations (Amendment)

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Banks (Shareholdings) Regulations (Amendment) 1996 No. 34

EXPLANATORY STATEMENT

STATUTORY RULES 1996 No. 34

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, 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 flying 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.

Two Japanese banks, Bank of Tokyo and Mitsubishi Bank, have agreed to merge as of 1 April 1996. This merger will also entail a merger of their Australian subsidiaries, Bank of Tokyo Australia Limited and Mitsubishi Bank of Australia Limited (MBA). The merged entity in Japan will be known as Bank of Tokyo -Mitsubishi Limited (BOTM). The merged entity in Australia will be known as Bank of Tokyo - Mitsubishi (Australia) Limited (BOTMA). Most of the business of MBA will be transferred to BOTMA, and MBA will become a subsidiary of BOTMA. In due course, a separate application will be made for revocation of MBA's banking authority, but this probably will not happen until after 1 April 1996. In accordance with section 63 of the Banking Act 1959, the previous Assistant Treasurer gave written consent for the merger to proceed.

To reflect the ownership by BOTM of 100 per cent of BOTMA, an instrument will be gazetted in accordance with the Act, effectively fixing a percentage of 100 under subsection 10(4) for BOTM in relation to its interest in BOTMA.

Under section 9 of the Act the associates (including officers, partners, subsidiaries and related companies) of BOTM would also be deemed to have the same interest in BOTMA as that corporation. In the case of officers of BOTM, an instrument pursuant to subsection 10(5A) of the Act is proposed which would fix a percentage of 100 in relation to interests in BOTMA for those persons who are from time to time relevant officers of BOTM.

To reflect the ownership by BOTMA of 100 per cent of MBA, an instrument will be gazetted in accordance with the Act, effectively fixing a percentage of 100 under subsection 10(4) for BOTMA in relation to its interest in MBA.

Under section 9 of the Act the associates (including officers, partners, subsidiaries and related companies) of BOTMA would also be deemed to have the same interest in MBA as that corporation. In the case of officers of BOTMA, an instrument pursuant to subsection 10(5A) of the Act is proposed which would fix a percentage of 100 in relation to interests in MBA for those persons who .are from time to time relevant officers of BOTMA.

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of BOTM in relation to BOTMA, other than its relevant officers. Similarly, it is not possible to make a 'class' instrument for the interests of the associates of BOTMA in relation to MBA, 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 BOTMA arising from associate relationships with BOTM, and to disregard, for the purposes of the Act, interests in MBA arising from associate relationships with BOTMA. These amendments will take effect as of 1 April 1996.

The details of the proposed Regulations are as follows:

Item 6 of the Schedule to the Regulations is amended by omitting from column 2:

Bank of Tokyo Australia Limited,

and adding under column 2:

Bank of Tokyo - Mitsubishi (Australia) Limited.

Item 6 is also amended by omitting under column 3 the following corporation:

Bank of Tokyo Limited:

and adding under column 3:

Bank of Tokyo - Mitsubishi Limited.

Item 19 of the Schedule to the Regulations is amended by adding to column 3:

Bank of Tokyo - Mitsubishi (Australia) Limited.

 

Overview

The Banks (Shareholdings) Regulations (Amendment) 1996 No. 34 were enacted to address the regulatory implications arising from the merger of two Japanese banks, Bank of Tokyo and Mitsubishi Bank, and their Australian subsidiaries. The Act, enacted in 1972, aims to regulate the shareholdings in Australian banks to ensure financial stability and protect the interests of depositors and the public. The problem these regulations sought to address was the complex ownership and control structures that would result from the merger, particularly in relation to the ownership percentages that would be applicable under the Banks (Shareholdings) Act 1972. The amendments to the Regulations were made by the Governor-General under the authority granted by the Act, with the policy objective of ensuring that the regulatory framework could accommodate the changes in ownership without disrupting the existing shareholding limits and oversight mechanisms.

Scope and Application

The Banks (Shareholdings) Regulations (Amendment) 1996 No. 34 applies to the amendment of the Banks (Shareholdings) Regulations under the Banks (Shareholdings) Act 1972. The Act generally restricts the nominal amount of voting shares a person may own in a bank to 10 per cent of the total nominal amount, or 15 per cent with the Treasurer's approval. The Act also allows the Governor-General to set a higher percentage if deemed to be in the national interest. The Regulations amend the list of prescribed interests in banks, specifically updating the names of the banks involved in a merger between Bank of Tokyo and Mitsubishi Bank, which resulted in the creation of Bank of Tokyo - Mitsubishi Limited and Bank of Tokyo - Mitsubishi (Australia) Limited, effective from 1 April 1996. These amendments ensure that the interests of associates of the new entities are disregarded under the Act, streamlining the regulatory process by omitting the need for individual instruments for each person or corporation within the meaning of section 9. The geographic reach of the Act is national, applying to all banks within Australia.

Key Provisions

The Banks (Shareholdings) Regulations (Amendment) 1996 No. 34 primarily address the amendment of the existing Banks (Shareholdings) Regulations to accommodate the merger of two Japanese banks and their respective Australian subsidiaries. Section 10 of the Banks (Shareholdings) Act 1972 generally restricts the nominal amount of voting shares a person can hold in a bank to 10% of the total nominal amount, or 15% with the Treasurer's approval. The Act also allows the Governor-General to set a higher percentage in the national interest (section 10(4)). Additionally, section 10(5A) allows the Governor-General to extend a fixed percentage to relevant officers of a corporation in relation to a bank. Section 17 empowers the Governor-General to make regulations for the purposes of the Act. The regulations impose several obligations on the parties involved. Firstly, they must comply with the shareholding limits set out in the Act, specifically section 10, which caps individual shareholdings at 10% unless otherwise approved by the Treasurer. This includes ensuring that any changes in ownership, such as mergers, are reflected accurately in the gazetted instruments. For instance, the merger of Bank of Tokyo and Mitsubishi Bank will necessitate a gazetted instrument to reflect Bank of Tokyo - Mitsubishi Limited’s 100% ownership of Bank of Tokyo - Mitsubishi (Australia) Limited. Furthermore, relevant officers of these banks must also adhere to the shareholding percentages fixed by the Governor-General, as outlined in subsection 10(5A). This ensures that all significant stakeholders are bound by the same regulatory framework. The Banks (Shareholdings) Regulations (Amendment) 1996 No. 34 also include provisions for penalties and consequences for non-compliance. Breaches of the shareholding limits set by the Act can result in significant penalties. For example, individuals or entities that exceed the permitted shareholding without proper approval may face financial penalties or other sanctions. The exact penalties are not specified in the explanatory statement but generally, such breaches can lead to fines, disqualification from holding positions within the bank, or other enforcement actions as deemed necessary by the relevant authorities. Additionally, the Act allows for civil and criminal consequences for wilful or negligent violations, ensuring that adherence to the regulations is strictly enforced. The regulations also address the complexities of corporate associations by specifying that the interests of associates in the merged entities should be disregarded for the purposes of the Act. This means that the interests held by subsidiaries, partners, or related companies of the merged banks will not count towards the overall shareholding limit. This is particularly relevant for the large and ever-changing group of associates of Bank of Tokyo - Mitsubishi Limited and Bank of Tokyo - Mitsubishi (Australia) Limited. By prescribing these interests, the regulations ensure that the shareholding limits are applied fairly and consistently across all stakeholders. Any failure to comply with these prescribed interests could result in the associates being held liable for the bank’s shareholdings, leading to potential breaches of the Act’s provisions.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.