Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1996 NO. 23

STATUTORY RULES 1996 No. 23

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 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.

Currently the Commonwealth Bank of Australia (CBA) and the Commonwealth Development Bank of Australia (CDB) are able to conduct banking business by virtue of their listing under section 5 of the Banking Act 1959. The CBA owns 91.9 per cent of the CDB, with the Commonwealth of Australia holding the remaining 8.1 per cent. The Government's decision to sell its remaining 50.39 per cent shareholding in the CBA will see the CBA put on a similar legislative footing as other privately owned banks. This will involve, inter alia, the granting of authorities to the conduct banking business under section 9 of the Banking Act 1959 to the CBA and CM This in turn will subject the CBA and CDB to the Banks (Shareholdings) Act 1972, and will require the making of instruments under section 10 of that Act.

Instruments have been gazetted in accordance with the Act, effectively fixing a percentage of 100 for the CBA in relation to its interest in the CM Fixing this percentage will allow the CBA to hold up to 100 per cent of the shares in the CDB.

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

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

The Schedule to the Banks (Shareholdings) Regulations is amended by adding a new item after Item 12, and the names Commonwealth Development Bank of Australia and Commonwealth Bank of Australia in columns two and three respectively.