Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1996 NO. 348

STATUTORY RULES 1996 No. 348

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.

St. George Bank Limited (St. George) and Advance Bank Australia Limited (Advance) have signed an agreement to merge through a Scheme of Arrangement. Shareholders will vote on this Scheme of Arrangement on 23 December 1996. The merged company, St. George Bank Limited, will be the largest regional bank in Australia. St. George intends that Advance will operate as a wholly owned subsidiary with its own banking authority for a period of up to three years. During this time, the business of Advance will be integrated into St. George and, following this, the banking authority of Advance will be surrendered. The Assistant Treasurer has given approval under section 63 of the Banking Act 1959 for St. George to acquire Advance.

An instrument under subsection 10(4) of the Act has been prepared, fixing a percentage of 100 for St. George, in relation to its interest in Advance.

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

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of St. George, other than its relevant officers. These other associates represent a large and everchanging 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 Advance arising from associate relationships with St. George.

The details of the proposed Regulations are as follows:

The Schedule to the Banks (Shareholdings) Regulations is amended by adding the following corporation to column 2:

Advance Bank Australia Limited;

and by adding the following to column 3:

St. George Bank Limited.

It is in the national interest for St. George Bank Limited to own up to 100 per cent of Advance Bank Australia Limited. The enlarged St. George-Advance group will be stronger and economically more efficient with resulting benefits for customers and the finance sector generally. Firstly, these benefits include: reduced risk through a greater spread of loan portfolio, both by customer sector and geographically; greater cost efficiencies through economies of scale; and reduced wholesale funding costs through improved ratings and improved access to international capital markets. Secondly, the merger will provide improved customer service, giving the customers access to a larger branch network. Thirdly, the proposed acquisition will enhance competition in the banking services sector by creating a larger regional bank more capable of competing effectively with the major banks.