Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1994 NO. 431

Statutory Rules 1994 No. 431

Issued by the Authority of the Assistant Treasurer

Banks (Shareholdings) Act 1972

Banks (Shareholdings) Regulations (Amendment)

Section 10 of the Banks (Shareholdings) Act 197 (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.

The Colonial Mutual Life Assurance Society Limited is an Australian mutual life office that proposes to acquire the State Bank of New South Wales (SBNSW) from the Government of the State of New South Wales. SBNSW is the fifth largest bank in Australia. Its primary market is NSW although it has operations in the ACT, Queensland and Victoria- Its strategy is to become the leading regional bank in Eastern Australia focussing on consumer lending, particularly housing. SBNSW was granted a banking authority in 1994 under the Banking Act 1959.

The Colonial Mutual Life Assurance Society Limited is seeking to acquire the SBNSW to diversify its operations and provide a broader range of financial services. The Emerald Holding Company Limited, a wholly owned subsidiary of Colonial Mutual, will acquire and hold the 100 per cent SBNSW shareholding. Colonial Investments UK Pry Limited, an Australian incorporated wholly owned subsidiary of Colonial Mutual, will acquire and own approximately 35 per cent of the shares of the Emerald Holding Company Limited. (The proposed Banks (Shareholdings) Regulations Amendment will include The Colonial Mutual Life Assurance Society Limited, Colonial Investments UK Pry Limited and the Emerald Holding Company Limited in the schedule.)

The Reserve Bank of Australia (RBA) and the Insurance and Superannuation Commission (ISC) support Colonial Mutual's proposed acquisition, via Colonial Investments UK Pty Limited and the Emerald Holding Company Limited, provided that Colonial Mutual adheres to undertakings it has made regarding various prudential and supervisory issues and demutualises by 31 December 1997 of 31 December 1998 at the latest.

Instruments have been gazetted in accordance with the Act, effectively fixing a-percentage of 100 under subsection 10(4) for The Colonial Mutual Life Assurance Society Limited. Colonial Investments UK Pty Limited and the Emerald Holding Company Limited in relation to their interests in SBNSW.

Under section 9 of the Act the associates (including officers, partners, subsidiaries and related companies) of The Colonial Mutual Life Assurance Society Limited, Colonial Investments UK Pry Limited and the Emerald Holding Company Limited would also be deemed to have the same interest in SBNSW as those economic entities. In the case of officers of the Colonial Mutual Life Assurance Society Limited, Colonial Investments UK Pty Limited and the Emerald Holding Company Limited, an instrument pursuant to subsection 10(5A) of the Act is proposed which would fix a percentage of 100 in relation to interests in SBNSW for those persons who are from time to time relevant officers of The Colonial Mutual Life Assurance Society Limited, Colonial Investments UK Pty Limited and the Emerald Holding Company Limited.

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of The Colonial Mutual Life Assurance Society Limited, Colonial Investments UK Pty Limited and the Emerald Holding Company Limited, 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 SBNSW arising from associate relationships with the Colonial Mutual Life Assurance Society Limited, Colonial Investments UK Pty Limited and the Emerald Holding Company Limited.

The details of the proposed Regulations are as follows:

The Schedule to the Banks (Shareholdings) Regulations is amended by omitting the following persons and corporations.

        State of New South Wales

and including the following corporations:

        Emerald Holding Company Limited

        Colonial Investments UK Pty Limited

        The Colonial Mutual Life Assurance Society Limited