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Bank Integration Bill 1991
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Parliamentary Research Service Department of the Parliamentary Library
This Digest was pepred for debate ant’
should not be taken as a complete guide to the legisl;ation which may reflect amendments.
Bank Integration Bill 1991
Date Introduced: 7 November 1991 House: House of Representatives Portfolii: Treasury
Purpose To provide for the integration of trading and savings banks and that assets and liabilities transferred will not be subject to certain Commonwealth or State/Territory taxes.
Background Currently, there are thirty one banking groups operating in Australia. These comprise: four nationally operating banks (the Australian and New Zealand Banking Group Limited, lCommonwealth Bank of Australia, National Australia Bank, and Westpac Banking Corporation); three State banks; seven regionally operating banks; and seventeen foreign banks.’
As at June 1990, the total assets of banking groups operating in Australia totalled approximately S326 billion (representing approximately 45% of the total assets of the financial system), compared to approximately $150 billion for non-bank financial intermediaries and approximately $150 billion for life offices and superannuation funds2 Nationally, the banking industry is dominated by the four major
nationally operating banks (the Australian and New Zealand Banking Group iLimited, Commonwealth Bank of Australia, National Australia Bank, and Westpac Banking Corporat:ion), which account for approximately 72% of market share.3 The four major nationally operating banks operate 5650 branches out of a total of 6917 branches in Australia, and 5665 agencies out of a total of 7300 agencies4
Individuals and corporations can own up to 10% of shares issued by publicly listed banks in Australia. This percentage can be increased to 15% were the permission of the Treasurer has been obtained. The four major nationalty operating banks have the following number of shareholders: Australian and New Zealand Banking Group Limited - 83 300; Commonweatth Bank of Australia - 210 178; National Australia Bank; 71 000; and Westpac Banking Corporation - 104 OOOa5
The structure of the Australian banking industry has changed rapidly in recent years. Since the deregulation of the Australian financial system from the earfy 198Os, the distinction between services offered between trading banks, savings banks and non-bank financial institutions such as merchant banks and finance companies has become blurred. The distinction between trading and savings
banks was abolished by the Banking Legislation Amendment Act 7989 which removed the definitions of these from section 5(l) of the Banking Act 7959. Section 28 of the 1989 Act provides that
references in Commonweafth or Terriiory laws, or in instruments or d!ocuments, to a trading bank or a savings bank are to be read as a reference to a bank as defined in the amended section 5(l) of the Banking Act 1959. However, while the 1989 Act removed the regulat.ory distinction between trading and savings banks it left trading and savings banks, as legal entities, intact. This Bill proposes to
provide a means by which integration may occur without adversely impacting financially or legally on the banks.
Main Provisions Part 2 of this Bill (clauses 7-l l), sets out the administrative steps tha.t will have to be taken before a trading and savings bank integration may occur. Where a trading and savings bank listed in Schedule 1 of this Bill agree to integrate, the trading bank may give notice of their agreement to the Reserve
Bank and the Treasurer (clause 7). Where the Reserve Bank receives notice of a proposed integration, it is to satisfy itself and certify to the Treasurer that the interests of the depositors of both the trading and savings banks would be adequately protected if integration were to occur (clause 8). Subject to clauses 10 and 11 (see below), where the Treasurer receives notice of a proposal of a trading bank and savings bank to integrate, the Treasurer may: if the trading bank is the Commonwealth Bank - in consultation with the chief executive officer of the bank; and if the trading bank is another bank -
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in consultation with the treasurer of the trading bank and the chief executive officer; by Gazettal, set
a day on which the assets and liabilities of the savings bank are to vest in the trading bank (the succession day) (clause 9).
The Treasurer is not to fix a succession day unless satisfied that the interests of the depositor: of the banks integrating are adequately protected (clause 10). In addition, the Treasurer is not to se1 a succession day for a trading bank (other than the Commonwealth Bank or the Bank of Nev, Zealand) and a savings bank unless satisfied that legislation has been enacted, in the State in which the banks are established, to facilitate the integration. State legislation is to contain certain provisions
including: on the succession day, the assets and liabilities of a savings bank vest in the trading bank, and for the dissolution on the succession day of the company that operated as the savings bank (clause 11).
The principal effect of Part 3 of this Bill (clauses 12-20) will be to provide that on the successior day, the trading bank will become the successor in law of the savings bank and that all property rights and liabilities of the savings bank will become those of the trading bank.
The vesting of the business of a savings bank in a trading bank, or anything done for a purpose connected with a vesting, will not be subject to Commonwealth, State or Territory taxes, except: tax imposed under the Income TaxAssessment Act 1936 (Cth); the Corporations: (T’ing) Act 1990 (WA); and fees or taxes prescribed by the Corporations Regulations of the States and Territories (clause 21).
References
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1. House of Representatives Standing Committee on Finance and Public Administration, / :
POCK/3 FULL OF CHANGE - Banking and Deregulation, November *I 991, p. 38. 2. Ibid., p. 43.
3. Ibid., p. 44.
4. Ibid., p. 44.
5. Ibid., p. 48.
Bilfs Digest service PaIiiamernaryResearcbSefvice
29 November1991
For further information, if required, contact the Economics and Commerce Group on 06 2772460.
This Digest does not have any official legal status. Other sources should be consufted to determine the subsequent official status of the Bill.
0 Commonweatth of Australia 1991.
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1991.
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