Cullen Michael: Reserve Bank of New Zealand Amendment Bill — First Reading 
Cullen Michael: Reserve Bank of New Zealand Amendment Bill — First Reading 
[Volume:632;Page:4220] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Reserve Bank of New Zealand Amendment Bill be now read a first time. 
 At the appropriate time I intend to move that this bill be referred to the Finance and Expenditure Committee for consideration that the committee present its final report on or before 9 October 2006 and that the committee have the authority to meet at any time while the House is sitting except during oral questions during any evening on a day in which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 192 and 195(1)(b) and (c). I should say that I do not expect that the select committee will need those powers because I do not anticipate there being a large number of submissions on this particular bill or indeed a great deal of controversy surrounding this bill. 
The bill is an omnibus bill that amends the Reserve Bank of New Zealand Act 1989 and the Racing Act 2003. The Business Committee has agreed to this omnibus provision. It is intended later to divide the bill into two separate bills reflecting the two parts. 
Part 1 amends the Reserve Bank of New Zealand Act 1989 and the amendments are to promote trans-Tasman coordination of banking regulation. The trans-Tasman coordination of banking regulation has been an important part of the trans-Tasman single economic market agenda as the New Zealand and Australian banking markets are amongst the most highly interdependent in the world with around 85 percent of our banking assets owned by Australians and New Zealand banking system assets comprising around 15 percent of the total Australian-owned banks’ assets. Effective cooperation between the two bank regulators has the potential to reduce banks’ operating costs and to assist the maintenance of financial stability in both countries. The trans-Tasman proposals will be matched by equivalent changes to counterpart Australian legislation which will require prescribed Australian financial authorities to cooperate with the Reserve Bank of New Zealand. The trans-Tasman provisions in the bill are to come into force by Order in Council around the same time that equivalent changes are enacted in Australia. 
The amendments on this side of the Tasman will require the Reserve Bank to support prescribed Australian financial authorities such as the Australian Prudential Regulatory Authority in the performance of their statutory authorities for financial stability and prudential regulation. They require the bank where reasonably practicable to cooperate with prescribed Australian financial authorities by supporting them and by avoiding actions that are likely to have a detrimental effect on financial system stability in Australia. For the purposes of the bill an action that is likely to have a detrimental effect on financial system stability in Australia includes but is not limited to an action that prevents or interferes with any outsourcing arrangement. The Reserve Bank will be required to the extent it considers reasonably practicable in the circumstances to consult with the prescribed Australian authorities where it believes that an action it may take is likely to have a detrimental effect on financial system stability in Australia. I repeat the Australians will be enacting mirror legislation within Australia. The bill also imposes an obligation on a statutory manager of a registered bank appointed under Part 5 of the Reserve Bank of New Zealand Act to obtain the Reserve Bank’s consent before taking any action that is likely to have a detrimental effect on financial system stability in Australia. 
The amendments to promote coordination of banking sector regulation will implement the Government’s response to the recommendations of a Joint Trans-Tasman Council on Banking Supervision. That council was set up last year as a result of an agreement between myself and Peter Costello in order to progress trans-Tasman issues in banking regulation. It represents a path-breaking advance in home-host supervisory cooperation. Home-host relationships allow for cross-border supervision of banks operating in more than one country and changes should allow regulatory costs while still allowing the Reserve Bank to continue to meet its existing statutory objectives. The changes will provide significantly greater assurance of cooperation and an obligation to consult but not unduly constrain the actions of the Reserve Bank. The obligations on the Reserve Bank apply only to the extent that they are reasonably practicable and the bank’s existing statutory objectives and responsibilities will continue to apply. 
At the same time a number of minor amendments are made to the principal Act. These amend the definition of “financial institution” to clarify the Reserve Bank’s ability to seek an Order in Council declaring a person to be a financial institution; to update the provisions obliging the Reserve Bank to keep a register of banks so as to make the provisions more technologically neutral; and to include directors of the Reserve Bank within the classes of persons entitled to protection from liability and a Crown indemnity when carrying out their functions under the Act. 
Part 2 of the bill amends the Racing Act 2003 and deals with what I think one could describe as a relatively minor matter. The amendments to the Racing Act will ensure that the New Zealand Racing Board can conduct racing and sports betting in compliance with the law following the demonetisation of the 5c coin. The Racing Board offers betting under the TAB brand and is required to round dividends down to the nearest multiple of 5c. But the 5c coin will cease to be legal tender from 1 November 2006. This of course will apply only when somebody makes a very small bet— 
John Key 
: In cash. 
Hon Dr MICHAEL CULLEN 
:—in cash—and when the dividend he or she gets is not actually a multiple of 5c—neither of which necessarily represents the great bulk of transactions at a TAB in the modern world. The board will not be able to meet its current requirements once the 5c coin goes out of circulation. The amendments delegate the responsibility for setting the rules surrounding dividends to the board. The board makes betting rules that specify the denomination to which dividends will be rounded. It is appropriate that the board makes those kinds of detailed betting rules rather than Parliament. That is really one of the reasons for the tight time frame of the legislation because demonetisation occurs on 1 November 2006. 
In conclusion I tell members that the most important part of this bill of course is the significant step in terms of trans-Tasman regulatory cooperation. It has been a very difficult issue. It was the highest priority for the Australian Government in terms of the trans-Tasman single economic market issue. On the other hand we took the position that there are also sovereignty issues related to New Zealand’s position. The outcome is one that I believe serves the interests of both countries and clears the way for us to make progress on a range of other issues in terms of the single economic market.