Chauvel Charles: Reserve Bank of New Zealand Amendment Bill (No 3) — Second Reading 
Chauvel Charles: Reserve Bank of New Zealand Amendment Bill (No 3) — Second Reading 
[Volume:649;Page:17966] 
CHARLES CHAUVEL (Labour) 
: 
 I am pleased to follow the member who has just resumed his seat Dr the Hon Lockwood Smith and I endorse the sentiments that he has expressed starting with the losses that ordinary New Zealanders have suffered over the last few months because of the difficulties in the finance sector. He is right in commending this legislation to the House along with the other measures that are currently being considered by the Finance and Expenditure Committee namely the financial providers and the financial advisers legislation which together form a suite of statutory protections for investors in what has frankly hitherto been an under-regulated sector particularly when we compare the level of consumer protection that exists here with that in our nearest commercially sophisticated neighbour Australia. 
The Reserve Bank of New Zealand Amendment Bill (No 3) comes in response to a review from Treasury—that was its original genesis—and the Ministry of Economic Development and the Reserve Bank of New Zealand which looked in 2005 at the regulation and performance of New Zealand financial institutions and a more recent review of financial products and providers. As I say this bill comes in response to that review. It will bring the regulation of non-bank deposit takers into line with international benchmarks. It will require those non-bank deposit takers to comply with minimum prudential requirements which will be set by the Reserve Bank of New Zealand and it is appropriate that broadly the same regime should be brought into effect as to bank and non-bank deposit takers. As far as the consumer is concerned there is little difference and it is appropriate that similar protections should exist across all sectors where there is the activity of taking deposits. 
As Dr Lockwood Smith said there is an issue around the definition of non-bank deposit takers. We have sought to address that in the Finance and Expenditure Committee’s report. We have included finance companies building societies and credit unions that issue debt securities and provide financial services. I hope that the definition will be sufficient to achieve the consumer protection ends of the legislation. 
As has also been mentioned the bill proposes that non-bank deposit takers should be required to have a current credit rating from a rating agency approved by the Reserve Bank. Of course that is not a panacea; it is not a be-all and end-all. What is required alongside that requirement are not only the other measures that are contained in the legislation which I will mention in a moment but also a general raising of the level of financial literacy on the part of New Zealanders. One of the things I think the select committee hopes is that with the advent of an institution like KiwiSaver where people have to look at what is happening with their retirement savings people will take a more active interest in what is happening with the money they have in the bank or invested for their superannuation and that over time working with Government initiatives in this area we can really lift the level of New Zealanders’ financial literacy in the same way that has occurred in Australia since compulsory superannuation came about there. 
The bill also empowers the making of regulations that require trust deeds to include a capital ratio that the non-bank deposit taker will be required to maintain a maximum limit on exposures to third parties and requirements as to liquidity and these amounts are to be set out in the trust deed. Those are the complementary measures I mentioned that along with the financial rating requirement ought to provide a suite of protection measures in this bill for consumers and really provide meaningful protection in the non-bank deposit taking sector. The bill also includes amendments to governance arrangements and they will increase transparency and accountability—again really shining the light into this sector and making sure it is cleanly governed and cleanly run for the benefit of consumers. 
It has been mentioned that the Finance and Expenditure Committee has recommended a number of changes to the legislation and I intend to speak in more detail to those changes during the Committee stage. I thank the Minister for his acknowledgment of the work done by the select committee. I think that all members of the select committee put a lot of work into ensuring that the bill that was returned to the House was the best possible bill that could come back. I think that the legislation to follow—the providers and advisers legislation—is a necessary complement to this bill to ensure that as far as the consumer of financial services is concerned there are appropriate protections. I thank the specialist adviser to the committee. He provided I think all committee members would agree very useful and sensible advice in terms of the amendments recommended to the House. I also thank the select committee staff for their invaluable assistance. It is good to hear that this legislation by the sound of it will have widespread support across the House. That is appropriate because it is a very good bill.