Treasurer Scott Morrison has announced the release of an exposure draft legislation, the Financial Sector (Shareholdings) Amendment (Relaxing Ownership Restrictions) Bill, which aims to “relax the restriction on ownership of banks and insurers” and introduce a “new streamlined approval path” to provide new entrants with “the time they need to test and grow their business before they need to consider diversifying ownership”.
According to Mr Morrison, the proposed framework would “increase the general FSSA ownership cap from 15 per cent to 20 per cent, in line with the requirements of the Foreign Acquisitions and Takeovers Act 1975”.
The proposed reform would also allow owners of “domestically incorporated companies” to hold over 20 per cent of an institution’s shares if:
- the owners are “fit and proper”; and
- applying to become an authorised deposit-taking institution (ADI) life insurer, or licensed as such for fewer than five years, the entity has assets of less than $200 million; or
- applying to become a general insurance company, or licensed as such for fewer than five years, the entity has assets of less than $50 million.
Moreover, entities using the streamlined approval path would be subject to standard conditions to ensure depositors remain protected and ensure ongoing capital adequacy.
Such conditions include:
- the annual provision of relevant information to the Australian Prudential Regulation Authority (APRA);
- requiring the entities’ owners to either divest their holdings within 24 months of exceeding the asset threshold (as outlined in the FSSA) or seek a formal exemption from Australia’s ownership restrictions subject to the existing national interest test.
“These changes, combined with APRA’s announced dual-phase licensing regime, will support innovation and encourage greater participation and competition in the financial system by reducing barriers faced by new entrants,” Treasurer Morrison said.
The government has opened consultation with stakeholders for the proposed reform, with submissions closing on 4 May 2018.