House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon P.J. Keating MP)

GENERAL OUTLINE AND MAIN PURPOSES OF THE BILL

The purpose of the Commonwealth Banks Act Amendment Bill is to implement a number of measures designed to modernise the structure of the constituent Banks of the Commonwealth Banking Corporation and to place them in a position where they will be able to compete, on a fully comparable basis with the major private banks. The Bill also provides for measures to substantially improve the capital position of the Commonwealth Bank of Australia, formerly the Commonwealth Trading Bank of Australia. These changes were decided upon following a major review of the financial structure and organisation of the Commonwealth Banking Corporation.

The main provisions of the Bill will:

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change the name of the Commonwealth Trading Bank of Australia to Commonwealth Bank of Australia (Commonwealth Bank);

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establish the Commonwealth Savings Bank (Savings Bank) as a subsidiary of the Commonwealth Bank;

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provide for the reserves of the Savings Bank as at 30 June, less $20 million, to become the share capital of the Savings Bank, and for that share capital to be vested in the Commonwealth Bank;

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provide for the injection of $15 million by the Commonwealth Government to the capital of the Commonwealth Bank;

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provide for the transfer of $75 million from the reserves of the Commonwealth Development Bank (Development Bank) to the capital of the Commonwealth Bank;

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provide for the proportion of net profits to be paid to the Commonwealth by the Commonwealth Bank to be determined by the Treasurer, with a maximum payment of 45% of the net profits of the Commonwealth Bank and its savings bank subsidiary, the Savings Bank;

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remove the present exemption from company income tax of the Savings Bank, the Development Bank and the Corporation; and

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allow for a more flexible management and Board structure, by removing the statutory general manager positions for the Trading Bank, the Savings Bank and the Development Bank and also the statutory executive committees of those Banks.