Bayly Andrew; Robertson GrantANDREW BAYLY (National—Port Waikato): Thank you Mr Chair. Nice to have that little break. We're now back into it Minister. So this time we might talk about the second of my five Supplementary Order Papers (SOPs) SOP 47—the criteria for board appointments—and it's very relevant in terms of recent conversations we've been having around Air New Zealand Minister. My SOP basically says that given that this is New Zealand's premier financial institution in terms of oversight of the financial sector in New Zealand it is essential that we get the right skill set on the board and at the moment we have this weird process in the bill. It's incredibly prescriptive about why you can't be appointed to the board such as if you have a criminal record or all those sorts of mind-blowing things so that if you were even thinking of putting your name forward and you actually fell within the trap of one of those you shouldn't have been considered anyway. To be appointed to the Reserve Bank is something that very few people will have the opportunity to do. It is a complex operation that the Reserve Bank runs. It needs to be run independently and it needs the skill sets to do it. So the SOP essentially says that there are four key parts of what the Reserve Bank does and we need to make sure that amongst the skill sets within the Reserve Bank board why don't we be very specific about some of those as opposed to obliquely referring to suitable skills? Namely the skill sets are financial stability—because after all as the Minister just noted before the dinner break that is the other term of basically saying inflation" and so it's having a good understanding of what are the aspects you might run to ensure financial stability. Prudential regulation: this is how banks operate—the framework they operate the capital adequacy framework and all that sort of thing. Macro-prudential tools: again you've just announced today Minister that you're going to—and I'm talking about the Minister here. The Minister is going to allow the Reserve Bank to look at debt to income restrictions. There is also crisis management and resolution. We just think it's absolutely essential that we be clear on what are the skill sets of board members and I'd just very much like to understand from the Minister why he is not prepared to be that explicit about the skill set. It doesn't mean that people can't go on for other reasons and we expect that there will be a diversity on the board and all those other good things. But why not be very clear about what the board should have in its skill set as opposed to saying why you can't be on the board? Hon GRANT ROBERTSON (Minister of Finance): I thank the member for his questions and for putting forward his Supplementary Order Paper 47 but I genuinely don't think it's needed. So if we track this through clause 28—or actually it starts at clause 24 with the board's role the membership of the board the method of appointment the criteria for recommendations qualifications etc. etc. The critical clause for the member's concern that he's just raised is clause 28(2) which says "The Minister may only recommend a person who in the Minister's opinion has the appropriate knowledge skills and experience to assist the Bank to achieve its objectives and performance functions." Those functions are in turn listed in clause 10(1) of the bill and those functions are "to act as the central bank for New Zealand … to act as a prudential regulator and supervisor" and it goes through all of those things all the way from paragraph (a) through to paragraph (j). So all one needs to do is refer from clause 28 back to clause 10 of the bill and all of the things that the member is concerned about—and in fact more than the member is concerned about—are covered. It is a reasonably normal form of drafting to be able to suggest what we want the board members to do but the functions are outlined because they are functions for the Act and they are therefore functions for the bank. So the member need not be concerned about that. On his concern about what you do when you don't want someone on the board again these are very familiar clauses that are put in place in these kinds of bodies where you are appointing a board and you want to make sure that there are reasons why someone shouldn't be on it. The reasons why someone should be on it are in clause 10."