Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1997 NO. 295

EXPLANATORY STATEMENT

STATUTORY RULES 1997 No. 295

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.

On 3 April 1997, Westpac Banking Corporation (Westpac) and Bank of Melbourne Limited (BML) signed an agreement to merge through a Scheme of Arrangement. This merger was approved at a meeting of BML shareholders. Westpac wants to merge with BML in order to combine regional banking proximity and understanding of markets with a national bank range of services, capital and expertise. Westpac intends that BML will operate as a wholly owned subsidiary with its own banking authority for a period of up to four years. During this time, the business of BML will be integrated into Westpac and, following this, the banking authority of BML will be surrendered. The Assistant Treasurer has given approval under section 63 of the Banking Act 1959 for Westpac to acquire BML.

On 25 July 1997, the Australian Competition & Consumer Commission announced that it would not oppose the proposed merger, but only after receiving legally enforceable undertakings from the two banks to, for a period of three years post-merger:

*       maintain a significant level of local operational autonomy for the Chief Executive Officer of BML;

*       maintain BML's trading hours for no less than 100 branches;

*       preserve the entitlement to certain transaction fee exemptions for existing BML customers; and

*       provide existing and new players in Victoria with access to Westpac's national EFTPOS and ATM networks, and to the electronic network of BML on fair and reasonable terms.

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

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

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of Westpac, 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 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 BML arising from associate relationships with Westpac.

.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:

Bank of Melbourne Limited;

and by adding the following to column 3:

Westpac Banking Corporation.

(1)It is in the national interest for Westpac to own up to 100 per cent of BML. Substantial efficiency benefits, anticipated to be approximately $75 million per annum, will follow from the merger. Customers of both banks will receive enhanced levels of service post-merger. BML customers will gain access to a full range of credit cards and to the home loan products. offered by Westpac, while Westpac customers will get access to the high standard of customer service and focus provided by BML's retail network. Further, the legally enforceable undertakings provided by both banks will ensure that the merger will not lead to a substantial lessening of competition in the Victorian market for retail banking services.


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