Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1998 NO. 50

STATUTORY RULES 1998 NO. 50

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 Emits 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.

AMP Limited (AMP) has submitted an application under Section 9 (2) of the Banking Act 1959, for the grant of an authority to carry on banking business to AMP Bank Limited (AMP Bank). AMP Bank will be wholly owned by a non-operating holding company, 'AMP Financial Investment Group Holdings Limited' (AMP FIGH), which is 100 percent owned by AMP. Another holding company under AMP, 'AMP Group Holdings Limited', will control the remainder of AMP's operations.

It is in the national interest for AMP and its wholly owned subsidiary, AMP Financial Investment Group Holdings Limited, to own 100 per cent of the shares of AMP Bank. The entry of AMP Bank through this corporate structure will introduce greater competition in the Australian financial sector. AMP Bank will be the first domestically owned new entrant into the market place following the Government's Financial System Inquiry in 1997.

An instrument under subsection 10(4) of the Act has been prepared, fixing a percentage of 100 for AMP and AMP FIGH in relation to their interest in AMP Bank.

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

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of AMP and AMP FIGH, other than its relevant officers. These other associates generally 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, the issue can be addressed through section 17 and paragraph 8(9)(d) of the Act which provide for these interests to be disregarded for the purposes of section 10 of the Act. 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 most appropriate means to prescribe these interests is to amend the Regulations by the insertion of a new Regulation 12 which will provide that the interests in AMP Bank shares that are deemed to arise under section 8 or 9 of the Act are disregarded, except for those interests held by shareholders in the relevant holding companies of AMP Bank for the purposes of section 10 of the Act (this ensures that shareholders in the ultimate holding company cannot avoid section 10 of the Act and hold a shareholding of more than 15 per cent).

The regulations commenced on gazettal.

Authority:       Subsections 10(4)

       and 10(5A) and

       section 17 of the Banks

       (Shareholdings) Act 1972