The Turnbull Government is today releasing exposure draft legislation to relax the restriction on ownership of banks and insurers as well as introducing a new streamlined approval path under the Financial Sector (Shareholdings) Act 1998 (FSSA) as part of this Government's commitment to improving competition in the financial sector.
This Bill will provide new and recent entrants the time they need to test and grow their business before they need to consider diversifying ownership.
Under the new framework, to be legislated this year, we will:
- 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; and
- allow owners of domestically incorporated companies to hold more than 20 per cent of an institution's shares as long as:
- the owners are 'fit and proper'; and
- if applying to become an authorised deposit-taking institution (ADI: broadly, banks; credit unions; and building societies) or a life insurer, or licensed as such for fewer than five years, the entity has assets of less than $200 million; or
- if 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.
To ensure that depositors remain protected, entities using the streamlined approval path will be subject to standard conditions to help ensure ongoing capital adequacy, including the annual provision of relevant information to the Australian Prudential Regulation Authority. Further, these entities' owners will also be required to either divest their holdings in line with the general FSSA requirements within 24 months of exceeding the relevant asset threshold, 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.
The exposure draft of the legislation is available on the Treasury website.
Submissions are due by 4 May 2018. The Government encourages all interested parties to make a submission.