Copeland Gordon: Reserve Bank of New Zealand Amendment Bill — Second Reading 
Copeland Gordon: Reserve Bank of New Zealand Amendment Bill — Second Reading 
[Volume:610;Page:7605] 
GORDON COPELAND (United Future) 
: 
 I guess it is probably unique in the history of democracy and probably in the history of the Western World for me to follow a speaker on the Reserve Bank of New Zealand Amendment Bill who was himself the former Governor of the Reserve Bank. I am not sure whether he was the gamekeeper or the poacher so I am not sure which way around the analogy should work. However for the sake of this debate we will now assume that he has become a gamekeeper. I have some trepidation in following such an expert in these matters; nevertheless as one would expect I intend to have my two bob’s worth as well on this particular bill. 
Essentially the bill updates the prudential oversight functions of the Reserve Bank in line with best international practice. Although the Reserve Bank is well known as the organisation that sets the official cash interest rate at quarterly or 6-monthly intervals the importance of the bank’s less prominent role in relation to the prudential oversight of our whole banking system cannot be overestimated. Banking represents a core service to all New Zealand families individuals farms and businesses. Day in and day out we rely on banks to transact millions of financial payments and receipts both within New Zealand and with the rest of the world. In such circumstances the failure of a bank would have devastating consequences especially for its depositors. 
When one thinks about it bank deposits and the sometimes quite significant credit balances held in cheque accounts represent an extraordinary act of faith for thousands of New Zealanders in the stability and longevity of their bank of choice. No formal security is held for those deposits so in the event of bankruptcy or failure customers end up amongst the unsecured creditors with the possibility of losses running into hundreds of millions or billions of dollars depending on the size of the bank concerned. One can argue that the risk for New Zealanders has increased rather than decreased because—with the exception of Kiwibank and the Taranaki savings bank—both relatively small banks all New Zealand banks are overseas owned. That increases the risk for New Zealand depositors because of the inbuilt tendency those banks would have in the event of a failure or potential failure to favour their home base over their overseas-based operations. 
As a country we can never afford to become complacent about those issues. The reality is that the institution that stands between New Zealand depositors and cheque account holders and the possibility of massive financial failure is the Reserve Bank of New Zealand. That reality demands that the Reserve Bank remains diligent and unswerving in carrying out its functions of prudential supervision with skill and dedication. The bank must never drift to a position where it becomes reactive; it must always be proactive in identifying problems and taking corrective action in advance to minimise potential risk. In that regard I am satisfied that under its present governor our bank does a great job. This bill will provide it both with a greater range of tools in the tool box and improve governance and other procedures with a view to preventing the unthinkable—namely the collapse of one of our major banks. 
One of the other issues the select committee grappled with was the use of the words “bank” “banking” or “banker” by non-bank financial institutions. The original bill—the bill that came through the first reading to the select committee—wanted to outlaw the use of those words by anyone other than a registered bank. However in the select committee it became clear to me that that would be robbing building societies and credit unions of the specific trademarks they have built up—in some cases over many years—as part of their brand promotion in the marketplace. 
When we think about it such trademarks represent private property and can be immensely valuable. The famous one I always think of is the shell used worldwide by the giant oil company of that name. The value of the brand in that case would be in the billions of dollars category. I give that example simply to illustrate the principle that it would be wrong to strip building societies and credit unions of their brand names and trademarks without full and fair financial compensation. I am pleased therefore that in the select committee we were able to modify the bill to allow the use of such trademarks etc. to continue. 
Building societies and credit unions are an important part of the New Zealand financial fabric and I hope they will thrive and attract additional business in the years ahead. They are Kiwi-owned grass roots close to their customer base and therefore often offer a range of innovative financial services loans and the like to families and others in a positive fashion. United Future values and appreciates their role in that regard. 
With those few words I have pleasure in signalling United Future’s support for this bill at its second reading.