Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1994 NO. 385

STATUTORY RULES 1994 No. 385

Issued by the Authority of the Treasurer

Banks (Shareholdings) Act 197

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 GovernorGeneral 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 that the Governor-General may, on the publication under subsection 10(4) of an instrument fixing a percentage applicable to that corporation in respect of a bank, after application made to the Treasurer by that 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 those corporations in respect of the bank. Section 17 of the Act provides that the Governor-General may make regulations for the purposes of the Act.

Internationale Nederlanden Groep NV (INGNV), is establishing a foreign subsidiary in Australia, ING Mercantile Mutual Bank Limited (IMM), to operate in retail and corporate banking. A banking authority has been granted to IMM under section 9 of the Banking Act 1959 and IMM has replaced INGNV's locally incorporated subsidiary, Mercantile Mutual Finance Corporation Limited (MMFC). With the banking authority IMM is required to comply with the Banks (Shareholdings) Act 1972 and the Banking Act 1959 in the same way as other authorised banks.

The ownership structure for IMM is INGNV indirectly holding 100 per cent of IMM. In INGNV's corporate structure, 90 per cent of the voting shares of IMM are directly held by Internationale Nederlanden Bank NV (ING Bank) and 10 per cent of the voting shares are directly held by Mercantile Mutual Holdings Limited (MMH). Thus, INGNV indirectly holds 100 per cent of the voting shares in IMM through its banking arm (90 per cent) and insurance arm (10 per cent). The 9

Reserve Bank of Australia supports this structure and this arrangement is consistent with the Government's foreign investment policy.

Instruments have been gazetted in accordance with the Act, effectively fixing a percentage of 100 for INGNV and ING Bank in relation to their interests in IMM. Fixing this percentage will allow INGNV and ING Bank to hold up to 100 per cent of the shares in IMM.

Under section 9 of the Act, the associates (including officers, partners, subsidiaries and related companies) of the INGNV and ING Bank is also deemed to have the same interest in IMM as the those corporations. In the case of officers of INGNV and ING Bank, an instrument has been gazetted pursuant to subsection 10(5A) of the Act which fixes a percentage of 100 relation to interests in IMM for those persons who are from time to time relevant officers of INGNV and ING Bank.

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of INGNV and ING Bank other than their 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 Regulation, where those interests are deemed to be held by virtue of an associate relationship. The effect of the amendments to the Regulations would be to disregard, for the purposes of the Act, interests in IMM arising from associate relationships with INGNV and ING Bank.

The amendment also includes a new regulation to assist in determining whether a corporation is a subsidiary of another corporation. This regulation refers to the Corporations Law for determining whether a corporation is a subsidiary of another corporation and will assist in determining associate relationships under the Act.

The details of the proposed Regulations are as follows:

The Schedule to the Banks (Shareholdings) Regulations has been amended by including the following bank:

ING Mercantile Mutual Bank Limited

and the persons having an interest in more than 15 per cent of the voting shares:

Internationale Nederlanden Bank NV, being the corporation formed or incorporated under that name in the Netherlands Internationale Nederlanden Groep NV, being the corporation formed or incorporated under that name in the Netherlands

The Regulations also include the following clause to assist in determining a subsidiary:

For the purposes of these Regulations, whether a corporation is a subsidiary of another corporation or not is to be determined in accordance with the Corporations Law.