Donald Rod: Reserve Bank of New Zealand Amendment Bill — Second Reading 
Donald Rod: Reserve Bank of New Zealand Amendment Bill — Second Reading 
[Volume:610;Page:7612] 
ROD DONALD (Co-Leader—Green) 
: 
 I am pleased to support this bill on behalf of the Green Party but I am not very happy with Lockwood Smith’s contribution because I thought it was an extraordinary attempt to rewrite history. It was fascinating to watch Lockwood Smith wax lyrical in his last 2 minutes—and he was doing well until the bell—and to watch Don Brash looking increasingly uncomfortable. Dr Smith tried to claim that National had something to do with restoring the words “bank” “banking” and “banker” for the credit unions and the building societies. Lockwood Smith may not have been at the same meeting I was at where the previous Governor of the Reserve Bank was absolutely adamant that we should stop credit unions and building societies from using those very words. I put my money on the previous Governor of the Reserve Bank having a big hand in drafting the bill in the first place that promoted the idea that credit unions building societies and the PSIS lose the right to carry out their lawful business and promote their services to customers. 
Dr Smith should reflect again on his outrageous claims that it was National that forced the Labour Government to make that change. It would be more truthful to say it was the previous Governor of the Reserve Bank Dr Brash who wanted to have those words taken out of the Act. I think the Government missed an important point there but that was dealt with very eloquently by all the submissions that we received particularly from the credit unions and from the Financial Services Federation representing the building societies and the PSIS. 
Tonight has been an interesting case in point with lots of people trying to claim credit for fixing up that particular aspect of the bill. I am going to join in and make some of my own claims but I will come back to that in a minute. I will first comment on some of the other significant changes that are in this bill. We are pleased to see there are changes to the governance of the Reserve Bank. It is important to change the balance of power so that the governor is not also the chair of the bank and to remove the deputy governor from the board. It is also a good thing to require the board to report annually on the performance of the bank and the governor. We support all those changes to the Act. 
One of the most interesting and perhaps most powerful changes to the legislation is clause 18 which inserts new section 77A “Changes of ownership”. It will be very interesting to see how Alan Bollard deals with that provision if Lloyds TSB does proceed with the sale of the National Bank. Section 77A gives the Governor of the Reserve Bank extraordinary powers to influence any change of ownership of a bank in New Zealand. For example a person—and that is a legal person—must obtain the written consent of the bank before a transaction could result in that person acquiring a significant influence over that registered bank or increasing the level of significant influence. The bank has the power to impose terms and conditions that it thinks fit which will create a very interesting situation for the Governor of the Reserve Bank. At the very least I believe that the governor needs to ensure that any change of ownership of the National Bank should lead to the new bank being a New Zealand - based company not another branch of an Australian bank as we put up with at the moment with most of the other commercial banks in New Zealand. Better still we believe that the governor should require that the new National Bank should have majority New Zealand ownership so that it would truly be a national bank. 
We put a challenge down to the Governor of the Reserve Bank to exercise his new powers under new section 77A wisely and cautiously but also in the best interests of New Zealand. What could be in the best interests of New Zealand more than New Zealand having a nationwide commercial bank owned and operated by New Zealanders investing in the New Zealand economy and returning the profits of that operation to New Zealand shareholders rather than all those profits continuing to leak off shore? 
I will now return to what are relatively minor clauses but none the less critical clauses in respect of building societies and credit unions. As I said earlier I would like to claim primary credit for the changes that did take place because despite the credit unions and building societies putting forward what I believed to be compelling and very eloquent arguments in their submissions the officials still reported back that they did not want any change to the bill. I am sure that other members of the Finance and Expenditure Committee will acknowledge it was at that point that we went through a rather protracted debate over several weeks to see how we could indeed allow those organisations to continue to do what they do well. 
The process went along these lines. Firstly the Financial Services Federation which represents 32 institutions in New Zealand particularly the building societies and the PSIS and which has assets of $10.5 billion pointed out the obvious—namely that stopping those organisations from using the words “bank” “banking” or “banker” in any of their slogans would lead to real economic disadvantage to them. Credit unions followed through by pointing out that such a restriction would be anti-competitive it would severely disadvantage credit unions and it would likely have a negative impact on those organisations. Members should bear in mind that credit unions have 183000 members in New Zealand and assets of $418 million so they are not fly-by-night organisations and they ought to be allowed to use straplines such as “Banking Where You Belong” and in the case of building societies simply “Banking”. 
 So they put their case and we listened to it. The National Opposition members were quite happy to dismiss the concerns raised by the credit unions and the building societies because members opposite are wedded to the big overseas multinational banks and are not particularly interested in the mutuals and cooperatives that the people of New Zealand support when they have the opportunity to do so. The officials stuck with their line but members such as myself were determined to turn that around. With the support of Graham Kelly who has been involved in a credit union Gordon Copeland Craig McNair from New Zealand First and David Parker from Labour we did manage to shift the ground over a period of weeks. It was difficult to find the right balance to ensure that the organisations could promote their services in competition with the big foreign banks that National is so wedded to at the same time as providing some protection for customers. 
I think that we came up with the perfect solution. I certainly recall that it was I who came up with the solution that on the one hand any credit unions or other institutions—and not just building societies but private banks—would have to specify in their advertising that they are not a registered bank but on the other hand we would allow them to continue to use the keywords “bank” “banking” and “banker”. That was the happy compromise that the committee was able to reach agreement on and it was something the Reserve Bank could live with and the Minister could live with. 
In echoing what Rodney Hide said earlier it was very much a case of MMP in action and before us today we have a bill that gives us the right outcome. The only people who are upset are those in the big banks who are clearly the ones who had complained to the Reserve Bank about the smaller competitors but who really did not have any case to put up. Reserve Bank officials admitted to us that none of the complaints against the credit unions and building societies had stood up when they were investigated. So this is a victory for the little people. It is good to see that every party is supporting the bill. Ironically it is good to see that every party including the National Party is claiming credit for helping out the credit unions and the building societies.