Dalziel Lianne: Westpac New Zealand Bill — In Committee 
Dalziel Lianne: Westpac New Zealand Bill — In Committee 
[Volume:672;Page:18809] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I have been really looking forward to the opportunity to participate in this debate because it has been such a fascinating one to follow from the outside. I do not serve on the Finance and Expenditure Committee so I was quite puzzled to see legislation on the Order Paper that looked as if it was doing exactly what had been done in 2006. To travel on this journey from a distance and see how the bill has got to this point has been quite fascinating. 
I should declare a conflict of interest. I am a customer of Westpac. I have been for many years. I signed up to the Bank of New South Wales when I was a university student at law school at Canterbury University and that was when I first became somebody. I previously had a banking account with Trust Bank Canterbury. The two banks that I had accounts with merged to form Westpac so I have been with it really for all my adult life. 
I know that my colleague has traversed the approach of the Reserve Bank to the local incorporation policy but what I found particularly interesting was that when the Reserve Bank was undertaking its discussions about bringing in the local incorporation policy a study was undertaken on whether Westpac Banking Corporation would be able to find an alternative to local incorporation. I am not sure whether members in the Chamber are aware of that. Westpac proposed in the initial stages to bolster its branch operation in ways that it felt would mitigate the risks that the Reserve Bank was seeking to address with the local incorporation policy. Unfortunately for Westpac though in those circumstances the Reserve Bank determined in late 2004 that Westpac’s proposal would not constitute an acceptable alternative to compliance with the policy. Therefore it required that Westpac operate in line with the local incorporation policy. It was out of that decision that the 2006 legislation occurred and that confused me as to why we had the second bill. 
When I was looking at the preamble I also noticed that there had in fact been previous regulation which had seen the assets and liabilities transferred from Westpac Banking Corporation to Westpac New Zealand. Then I realised that this bill is about another step which is the institutional business. The institutional business has been run by Westpac Banking Corporation which is the parent company as a branch through its New Zealand operation. But now we are transferring the liabilities and assets of the institutional banking arm to Westpac New Zealand. Have I got it? I have got the thumbs up from the chair of the Finance and Expenditure Committee and I do not think I can expect better than that. As I said I have been studying this for quite some time—all of half an hour—and it has certainly been an important journey to traverse. 
A point that is well worth making is that one of the reasons why Australia and as a result New Zealand was spared some of the excesses that were poured across the world by the financial services sector—and the banking sector in particular—in terms of the global financial crisis was Australia’s four pillars policy. Australia owes great thanks to one Paul Keating who I think will go down in Australia’s history as having provided the stability that the country needed not only with the four pillars policy but also with its superannuation policy which we jealously observe from this side of the Tasman. We look at the amount of available capital that has been amassed and the depth of its capital markets which is in part attributable to that. When we look at the local incorporation policy coupled with the strength of the Australian banking system we see that it is not an absolute protection but that it is a much better protection. It perhaps would not have been the absolute protection against the fall-out from the global financial crisis if the Australians had not required that their four banks be Australian owned totally locked down. 
If we look at what happened internationally we would assume that the behaviour of banks would be without question. But in fact the way that banks behaved internationally which brought the world the global financial crisis is a disgrace. It is a disgrace that the people who worked in those professions allowed investors and savers as investors to be exposed to the true risk and the level of risk without any compunction and without any genuine attempt to address the pillars I believe of any banking system which has to be based on absolute trust and integrity. Those institutions of the world let down the people of many many countries. New Zealand and Australia were spared the excesses of that largely because of the ownership of the four banks within Australia and because our own local incorporation policy would have acted as a backstop protection had that been required. 
I am very much in support of seeing the shoring up of the activities of Westpac. The work of its institutional banking is now being brought squarely and fairly within the frame of Westpac New Zealand bringing on board those assets and liabilities within the New Zealand - incorporated structure. I believe that will strengthen the New Zealand structure and will act as a better protection. 
I think the chipping I received from the member opposite—I cannot remember his name—related to reference to the finance company failures we experienced. That was not part of the global financial crisis but some of the issues were exactly the same. For example people did not know the level of risk to which they were exposing their hard-earned money. Although we ended up with the Crown Retail Deposit Guarantee Scheme sitting in behind the banks the first time round in actual fact if one looks at where the stability was really required one sees it was with the non-bank deposit taking sector which was I am afraid without all of the protections. If there was a revisionist opportunity then maybe I would have looked very carefully as to whether the Crown Retail Deposit Guarantee Scheme should have been so widely available to the non-bank deposit taking sector. 
What has been fascinating to me is watching what has happened with the extension to the Crown Retail Deposit Guarantee Scheme that occurred late last year and seeing who took it up. The banks did not need it. They did not go near it. Who took up the retail deposit guarantee the next time round? South Canterbury Finance and a few others. One has to think very carefully about the message we send with some of the policies that are developed. To be quite honest whether or not one agrees with the original decision about making that scheme available to the non-bank deposit taking sector the reason it was vital for the banks was— 
Amy Adams 
: How does this relate to the Westpac bill? 
Hon LIANNE DALZIEL 
: Because it covered Westpac New Zealand and that is entirely the point. The whole policy—[ 
Interruption 
] Well I will take another call as a result of that. I had almost finished but I have now been interrupted so many times that I will have to take a further call to explain why what I am saying is entirely in order for the debate on this bill. The reason is that the Reserve Bank set up the local incorporation policy for strategic banks and the reason they were strategic was the amount of the retail deposit sector they had. Therefore talking about the Crown Retail Deposit Guarantee Scheme is entirely in order in relation to this bill. 
Given that Amy Adams wishes me to contribute much much more to this debate I shall go back to the point I was making. The point I was making was that whether or not one agreed with it the banks had to have the Crown Retail Deposit Guarantee Scheme put in place.