A structure to promote ANZ’s purpose and strategy

We are a bank whose principle businesses are taking deposits, making loans and facilitating payments. Much as banks have done for half a millennium.

“The NOHC structure and the scheme of arrangement to implement it is consistent with our strategy. Separating prudentially regulated banking and more conventionally regulated other activities removes layers of governance complexity.”

What has changed however is the environment in which we operate, the technology that supports banking, those with whom we compete – and the expectations of our customers.

Beyond those – highly regulated, highly secure and very distinct – core banking activities, our customers now expect much more advanced technologies, add-on services and deeper engagement. Indeed, products and services which are not part of traditional banking but which make our traditional banking better.

So what we are proposing with the NOHC is a legal structure which allows us to clearly separate our fundamental, core banking business from these new elements.

The model, as I have explained previously, is hardly novel, many banks around the world have moved this way; nor has it presented any public concern from regulators whose focus, rightly, is on safeguarding our key banking business.

The ANZ board considered a number of alternatives to ensure ANZ could continue to pursue its strategy while meeting its obligations to the Australian Prudential Regulation Authority and other regulators. These alternatives included a dual-listed company structure, stapled security structure or a minority investment structure.

Ultimately, the ANZ board believes the NOHC will provide the optimal structure for ANZ.

We are now at the stage of asking our shareholders to vote on a model for implementing the NOHC. Separating ANZ’s banking businesses and certain non-banking businesses within the ANZ Group creates greater transparency and clarity for employees, customers, regulators and investors. And the most appropriate model to implement a NOHC is a scheme of arrangement.

A scheme of arrangement is a procedure under the Corporations Act that allows a company to reconstruct its capital. The procedure requires shareholder and court approval. A scheme procedure is frequently used to effect an acquisition of 100 per cent of the shares in a target company but in our case it gives effect to the acquisition by ANZ Group Holdings – the holding company – of 100 per cent of the shares in ANZBGL – the banking business – and the issue of replacement shares to ANZBGL shareholders.

Some may ask why we used a scheme of arrangement to go through what is essentially an internal restructure and where the outcome of the restructure is arguably simple.

However, the process itself is needed in order to comply with various pieces of legislation including the Banking Act, Financial Sector (Shareholdings) Act, as well as the Corporations Act which governs schemes of arrangement.

This is the only way a restructure of this type – which includes the exchange of publicly listed shares – could be implemented.

I would add, relative to other companies that have undergone similar restructures, ANZ’s restructure has involved significantly less cost.

The NOHC structure and the scheme of arrangement to implement it is consistent with our strategy. Separating prudentially regulated banking and more conventionally regulated other activities removes layers of governance complexity.

The new structure can help ANZ develop a holistic digital banking ecosystem including adjacent, non-banking services, platforms and partnerships that complement ANZ’s core banking business and better meet customers’ needs in the digital age.

Those non-banking services, platforms and partnerships will not become the main business for ANZ. They will support and enhance our main business. The nature of the opportunities and risks these non-bank businesses present are distinct and, again, it makes sense for them to be separate.

I would add that just as our regulators don’t want non-bank businesses to add great risk to our core banking, that is also something we are very sensitive to.

We’ll look at all opportunities to improve the financial wellbeing and sustainability of our customers by providing connected, relevant and efficient services, tools and insights, directly or in partnership with others.

In that sense, the NOHC will promote our purpose and our strategy to grow the financial wellbeing of our customers.

ANZ shareholders should carefully read the explanatory memorandum announced to the ASX on 27 October 2022 in full before deciding whether to vote in favour of the scheme. Section 5 of the explanatory memorandum outlines the benefits and disadvantages of the restructure.

Ken Adams is Group General Counsel at ANZ.