Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1996 NO. 259

STATUTORY RULES 1996 No. 259

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-1-, 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 State of Queensland currently owns both the Suncorp Group and the Queensland Industry Development Corporation (QIDC). In addition, the State of Queensland owns 9.9 per cent of Metway Bank Limited (Metway). The Queensland Government is proceeding with a proposal to merge Suncorp and QIDC with Metway to form a large, Queensland based financial institution. Specifically, the merger plan involves Metway purchasing QIDC and Suncorp from the State of Queensland in return for which Metway will issue both shares and capital notes to the State of Queensland. Also, existing Metway shareholders will be offered a choice between an interest in the enlarged Metway group, or accepting a cash offer of $4.80 per share. Depending on the take-up rate of the cash offer, the State of Queensland will own between 67 and 100 per cent of Metway. These shares will be held by a State of Queensland owned entity, Queensland Treasury Holdings Pty Ltd (QTH). Some or all of these shares will subsequently be held by the Trustee of SuncorpMetway Exchanging Preferred Unit Trust (the Trustee). Units in this Trust will be offered to the public to help finance the acquisition of Metway shares. The Assistant Treasurer has given approval under section 63 of the Banking Act 1959 for Metway to merge with QIDC and Suncorp. The Queensland Treasurer has also provided the Treasurer with an undertaking that the State of Queensland will sell down its interest in Metway to less than 15 per cent within 5 yews.

An instrument under subsection 10(4) of the Act has been prepared, fixing a percentage of 100 for the State of Queensland, QTH and the Trustee, in relation to their interest in Metway.

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

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of the State of Queensland, QTH and the Trustee, 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 hold 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 Metway arising from associate relationships with the State of Queensland, QTH and the Trustee.

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:

Metway Bank Limited;

and by adding the following to column 3:

State of Queensland;

Queensland Treasury Holdings Pty Ltd; and

The Trustee of Suncorp - Metway Exchanging Preferred Unit Trust

-1- It is in the national interest for the State of Queensland to own up to 100 per cent of Metway, and for these shares to be held by QTH and the Trustee. The merger of Suncorp, QIDC and Metway has the potential to deliver considerable rationalisation benefits, derived from branch and head office cutbacks, and from revenue gains from the implementation of 'bancassurance' (the delivery of a broad range of financial services, including insurance and banking products, through the existing branch network). Also, as the State of Queensland has undertaken to sell down its interest in the Metway group to less than 15 per cent within 5 years, the merger plan allows the Queensland Government to achieve its goal of privatising its financial institutions.