Treasury has published an exposure draft of the Financial Sector (Shareholdings) Amendment (Relaxing Ownership Restrictions) Bill 2018.

This Bill will if passed:

• increase the ownership limit in financial institutions and insurers from 15 per cent to 20 per cent; and
• introduce a streamlined approval path for new and recent entrants, where assets are under a specified amount, to allow them the time they need to test and grow their business before they need to consider diversifying ownership.

Ownership restriction

The 15 per cent ownership restriction currently applying to insurance companies (life insurance and general insurance companies), Authorised Deposit-taking Institutions (ADIs) – banks, credit unions and building societies, and relevant holding companies under the Financial Sector (Shareholdings) Act 1998 (FSSA) will be increased to 20 per cent.

New financial sector entrants path

The Bill also introduces a streamlined FSSA approval path for owners of domestically incorporated companies applying to become a new financial sector company (or a company that has been a financial sector company for less than 5 years). These owners may be eligible to receive streamlined approval to hold a stake of more than 20 per cent when certain criteria are met.

There is an asset threshold that must be met before an owner will be able to seek authorisation under the streamlined path for new entrants:

• In relation to an ADI or a life insurer, the value of the total resident assets of that company must be less than the assets threshold of $200 million or any amount prescribed by the Treasurer in a legislative instrument;
• If the relevant company is a general insurer, the asset threshold applying in relation to the streamlined path is total resident assets of $50 million, or another amount as prescribed by the Treasurer in a legislative instrument.

Rules will be made by APRA which set out the meaning of “total resident assets”.

Approval under the streamlined path is subject to a ‘fit and proper’ test.

The following conditions also apply to all streamlined approvals : 

• notify the Treasurer in writing if the assets threshold is breached;
• five yearly review of the ownership structure of the relevant financial sector company; and
• yearly reporting of information to APRA.

Approvals under the streamlined path will generally remain in place until the end of two years after the value of the total resident assets of the financial sector company first exceeds the assets threshold applying to a company of that type. After this time, without divestment, an unacceptable shareholding situation would exist and the shareholder would have to rectify the unacceptable shareholding situation by either divesting their shares or seeking approval to hold the higher stake.