Gilmore Aaron: Non-bank Deposit Takers Bill — First Reading 
Gilmore Aaron: Non-bank Deposit Takers Bill — First Reading 
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AARON GILMORE (National) 
: 
 It is a privilege to talk on the first reading of the Non-bank Deposit Takers Bill. It is sponsored by the Government and will go to the Finance and Expenditure Committee. As mentioned by earlier speakers this bill is a continuation of the movement towards central regulation of the wider finance and investment sector and it is one that we wholeheartedly support. 
There are a couple of interesting analogies that I will quickly touch on. One is the comparison between this bill and the Insurance (Prudential Supervision) Act which came before this House last year and has now been in place for about 12 months. That was shown to be very very useful particularly in the recent earthquakes that hit Christchurch and in relation to the underlying prudential security of the insurance companies in Christchurch. Prior to that bill being put in place there was no prudential security for the insurance sector. This bill is a bit like that but for finance companies. 
There have been some holes in the finance company prudential regime and this bill will be the last plank to resolve those. One of the measures that I quite potentially like relates to increasing the information disclosure powers that the Reserve Bank has in respect of non-bank deposit takers particularly on the directors and officers of those entities. There is a really interesting little hook here in relation to requiring consent from the Reserve Bank to purchase equity in underlying entities. The Reserve Bank will have to give consent for more than 20 percent of the equity to change hands. That is very similar to what applies under the Takeovers Code to a code company to a normal entity that is a non-bank deposit taking business. I think that is a good step forward. It strengthens things. If one is a non-bank deposit taker one is treated very similarly to the way one is treated under a Takeovers Code - type entity and that is a sensible step forward given that many finance companies rely on the investments of mums and dads out there who generally speaking need a bit of help from the Government. They need the Government to put in place a prudential regime because there have been a number of instances of people who have committed fraud in some cases. That has been outrageous and we need to strengthen that sector. 
This week in particular we have seen some of the results of financial turmoil around the world. We have had riots in London which are still occurring today. The financial markets have been very volatile and have been going both up and down. In those situations with regard to the issue of finance companies that are second and third tier - type lenders and non-bank deposit takers people need the comfort in knowing that the entities that they are giving their money to have a regime that puts in place some security for the funds that they are lending particularly given that most of those entities lend to fringe commercial operators. We have seen that in terms of commercial property development. There has been a number of very high-profile cases of property development failure particularly in the South Island. Around Queenstown some very big white elephants were funded and in Auckland as well where property developers had money lent to them in many cases from finance companies and the funds were lost because of a lack of transparency and the lack of knowledge that lenders to those businesses and the borrowers had. This bill will allow more information to go back to the Reserve Bank in order to give it back to those punters so that they are clearer that their funds are actually being invested in the way that they intended them to be. 
The bill does not put in place a regime that is as strict as some would like it to be and we will have an interesting debate on that in the select committee I am sure. Some people will want to tighten up the prudential regime even further and that will be an interesting situation to see when we receive the submissions. I suspect that others will think that this is too tight a regime in a sector that has historically had a lot of laissez-faire - type rules around it. But we have seen that we do need to do something and this bill is the right step forward. 
Finally a number of other prudential security bills are coming through particularly on security reform and things like that. There is a financial summit on tomorrow which has been mentioned previously. It will be interesting to see what comes out of that and to see whether any other forms of legislation or rules may be required. We all support those who want to go to that summit and put forward any further ideas on financial sector reform so that we can protect those funds and the mums and dads out there. Thank you.