Proposed Acquisition of Colonial Limited by the Commonwealth Bank of Australia

May 30, 2000

NO.044

Proposed Acquisition of Colonial Limited by the Commonwealth Bank of Australia

I am announcing today my approval under the Financial Sector (Shareholdings) Act 1998 to the proposed acquisition of Colonial Limited by the Commonwealth Bank of Australia (CBA).

This means that I am satisfied the acquisition is in the national interest taking into account advice from the Australian Prudential Regulation Authority (APRA) ,the findings of the Australian Competition and Consumer Commission (ACCC) inquiry into the proposed acquisition, as well as undertakings the CBA made to the Commonwealth when seeking approval.

APRA has advised that the proposed acquisition raises no significant prudential concerns.

The ACCC has indicated that the anti-competitive effect of the acquisition that it had identified can be effectively remedied through the various court enforceable undertakings that the CBA has made to the ACCC under section 87B of the Trade Practices Act 1974. These undertakings, which are summarised at Attachment A, will have the effect of enhancing competition in the retail banking markets of Tasmania and rural NSW as well as minimising the ability of the CBA to exercise market power in those markets.

The CBA made various undertakings to the Commonwealth in seeking approval for the acquisition of Colonial. In particular, the CBA undertook: to retain Colonial State Bank sites where there is no CBA branch within close proximity; in any country town where the CBA or Colonial is the last bank in the town, the branch will be retained for at least the next five years; and, in country towns, any amalgamated branch will be retained for at least five years. Furthermore, the CBA undertook to ensure that there will be no involuntary employment losses in Tasmania and rural and regional NSW as a result of the acquisition of Colonial. In fact, there will be a net increase in employment in Tasmania.

I have accepted the CBAs undertakings and made them conditions of the approval under the Financial sector (Shareholdings) Act 1998 (FSSA). These conditions are at Attachment B.

The proposed acquisition will have broader national benefits by creating a stronger and more diversified financial institution with scope to generate greater operational efficiencies, lower cost services and more diverse products for consumers.

Approval of the proposed acquisition under the FSSA will also be made conditional upon the agreement of the shareholders of Colonial Limited to the proposal and the endorsement of the relevant schemes of arrangement.

CANBERRA
30 May 2000

Contact: Niki Savva 02 6277 7340

ATTACHMENT A

ENFORCEABLE UNDERTAKINGS GIVEN TO THE ACCC BY THE CBA

Access

Provide new entrants and smaller players in Tasmania and regional NSW with access to CBA/Colonial ATM and EFTPOS networks;

Submit to a dispute resolution process, should a dispute arise over access to these networks;

Vacation of Banking Sites

On vacation of a CBA/Colonial banking site in Tasmania or regional NSW, and subject to certain conditions, offer that site to a new entrant or small player intending to provide services at that site;

Systems & Processing Support

Provide IT systems support and processing support to financial institutions intending to provide services to customers in Tasmania or Regional NSW;

Submit to a dispute resolution process, should a dispute arise over provision of that support;

Pricing, Service Quality & Product Range

Provide customers in Tasmania and regional NSW with pricing and service quality that is equivalent to, or more favourable than that supplied to customers in metropolitan NSW;

Make available to customers in Tasmania and regional NSW the same standard products, subject to certain conditions, that are available to CBA customers in metropolitan NSW; and

Pay the costs of, and provide information to, an independent monitor who will be appointed to report to the Commission on CBAs compliance with these undertakings.

ATTACHMENT B

Commonwealth Bank of Australia Commits to Observe the conditions set out below

Definitions

banking site:

any building, or other physical structure, owned, leased or

licensed by Commonwealth Bank of Australia, Colonial Limited, the State Bank of New South

Wales Limited trading as the Colonial State Bank or the former Colonial Trust Bank (or any

of their related corporations) at which Commonwealth Bank of Australia, the Colonial State

Bank or the former Colonial Trust Bank carries or carried on banking business.

Branch:
any banking site at which Commonwealth Bank of

Australia, the Colonial State Bank or the former Colonial Trust Bank provides over the

counter banking services.

close proximity:

in relation to branches in rural and

regional Australia means equal to or less than 2.5 kilometres and otherwise means equal to

or less than 1 kilometre.

condition period

: 5 years commencing on the effective

date unless otherwise specified.

country town

: any town in rural and regional Australia

outside the metropolitan area of an Australian State or Territory.

effective

date: the date upon which the Scheme of

Arrangement between Colonial Limited and its ordinary shareholders becomes binding on

those ordinary shareholders of Colonial Limited in accordance with section 411 of the

Corporations Law.

employee

: any person who is, on the effective date, an

employee of Commonwealth Bank of Australia or Colonial Limited or any of their related

corporations.

full time equivalent:

counts part time and casual

employees (as well as full time employees) but having regard to their working hours

compared to the standard working hours of a full time employee.

integration period

: the period of two years from the

effective date.

metropolitan area of an Australian State or Territory:

in

each State or Territory except Tasmania, means the metropolitan and suburban area of the

capital of that State or Territory; and in Tasmania means the metropolitan and suburban

area of Hobart and Launceston.

reasonable commuting distance:

the same interpretation

as applies under the Redeployment and Redundancy provisions of the Commonwealth Bank of

Australia Enterprise Bargaining Agreement 1998.

rural and regional New South Wales:

the geographic region

of New South Wales other than the metropolitan area of New South Wales.

rural and regional Tasmania

: the geographic region of

Tasmania other than the metropolitan area of Tasmania.

rural and regional areas

: the geographic region of

Australia other than metropolitan areas.

third party branch:

a branch of any Authorised Deposit

Taking Institution other than Commonwealth Bank of Australia or its related entities.

Interpretation

In these conditions the singular includes the plural and vice versa.

1 Duration of conditions

1.1 These conditions will continue for a period of 5 years commencing on the effective date, subject to any specific time period set out in these conditions in which case that latter time period prevails.

2 Retention of Colonial State Bank and former Colonial Trust Branches – General

2.1 For at least the duration of the integration period, Commonwealth Bank of Australia will retain any Colonial State Bank Branch or former Colonial Trust Bank Branch where there is not a Commonwealth Bank of Australia branch within close proximity at the effective date.

3 Retention of Branches – Country Towns

3.1 For the duration of the condition period, where there is at the effective date a Branch in a country town and no third party branch in that country town, Commonwealth Bank of Australia will retain at least one branch in that country town.

3.2 For the duration of the condition period, Commonwealth Bank of Australia will retain at least one Branch in a country town where an amalgamation of branches occurs in that country town during the integration period.

4. Tasmanian Call Centre

4.1 Commonwealth Bank of Australia will ensure that there is a net employment increase in its employees in Tasmania by the end of the integration period of 460 full time equivalent positions. This commitment is on the terms agreed with the Tasmanian Government in Commonwealth Bank of Australias proposal dated 7 April 2000.

4.2 To this end, Commonwealth Bank of Australia will (itself or through any related corporation) establish one or more new national call centres in Tasmania, with a total of over 500 full time equivalent call centre positions being created.

5 Rural and regional employment

5.1 Commonwealth Bank of Australia will ensure that, during the integration period, no employee who is employed in rural and regional New South Wales or rural and regional Tasmania will cease to be employed by Commonwealth Bank of Australia, the Colonial State Bank or the former Colonial Trust Bank (as applicable) other than:

by resignation or voluntary exit by the employee;

by termination by the relevant employer because of the capacity or conduct of the employee;

where the employee has voluntarily accepted other employment or otherwise become employed by Commonwealth Bank of Australia or Colonial Limited or any of their related corporations; or

where the employee has been offered other employment by Commonwealth Bank of Australia, either at or within reasonable commuting distance from the place of business at which he or she was employed at the effective date, on similar terms to those applying to his or her employment by Commonwealth Bank of Australia, the Colonial State Bank or the former Colonial Trust Bank (as applicable).

5.2 If, at any time during the integration period, there would be fewer employees (including for the purposes of this clause 5.2 part time and casual employees, counted on a full time equivalent basis), employed in rural and regional New South Wales than there were as at the effective date, Commonwealth Bank of Australia will ensure that the number of employees employed in rural and regional New South Wales during the integration period returns to the number so employed as at the effective date, for example by establishing operations such as back office operations or call centres in rural and regional New South Wales.

6 Force Majeure

6.1 Commonwealth Bank of Australia will not be liable for any failure to perform any obligation imposed by these conditions if the failure is due to Force Majeure.

6.2 If Commonwealth Bank of Australia is by reason of Force Majeure unable to perform an obligation under these conditions, Commonwealth Bank of Australia will as soon as practicable and in any event within 30 days notify the Treasurer specifying:

the cause and extent of non-performance;

the date of commencement of Force Majeure;

the means proposed to be adopted to remedy or abate the Force Majeure;

and will use all reasonable diligence and employ all reasonable means to remedy or abate the Force Majeure as expeditiously as possible.

6.3 Force Majeure means:

any act of God;

war, revolution, or any other unlawful act against public order or authority;

an industrial dispute; or

a governmental restraint.

7 Notification

7.1 Commonwealth Bank of Australia will give written notice to the Treasurer of the following matters as soon as practicable and in any event within 30 days after the relevant occurrence:

the effective date; and

the commencement and termination or abatement of the Force Majeure.

Signed by Michael James Ullmer for and on behalf of the Commonwealth Bank of Australia (ACN123 123 124)