Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1995 NO. 415

STATUTORY RULES 1995 No. 415

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.

Lloyds Bank NZA Limited (Lloyds NZA) has an authority under section 9 of the Banking Act 1959 to carry on a banking business, and is a wholly owned subsidiary of Lloyds Bank Plc (Lloyds). Lloyds and TSB Group Plc (TSB) recently announced an intention to merge. The proposed merger will involve the cancellation of Lloyds' present issued share capital and the issue of new Lloyds' shares to the ultimate parent company of TSB, which will subsequently be renamed Lloyds TSB Group Plc. This merger will result in TSB holding, albeit indirectly, the whole of the issued shares of Lloyds NZA.

Lloyds NZA will remain as a separate entity with its own banking authority, and is expected to continue to operate substantially as at present. Lloyds NZA perceive, however, that competitive advantages will accrue from membership of an enlarged group.

To reflect the ownership by TSB of 100 per cent of Lloyds NZA, an instrument will be gazetted in accordance with the Act, effectively fixing a percentage of 100 under subsection 10(4) for TSB in relation to its interest in Lloyds NZA.

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

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of TSB, 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 Lloyds NZA arising from associate relationships with TSB. For the purposes of paragraph 8 (9) (d), the list of prescribed interests in both Lloyds NZA and Macquarie Bank Limited has been extended to allow for the deeming provisions of s. 8 (4) (c) of the Act.

The details of the proposed Regulations are as follows:

The Schedule to the Banks (Shareholdings) Regulations (item 17) is amended by adding the following corporation to column 3:

TSB Group Plc.