Dalziel Lianne: Crown Retail Deposit Guarantee Scheme Bill — In Committee Third Reading 
Dalziel Lianne: Crown Retail Deposit Guarantee Scheme Bill — In Committee Third Reading 
[Volume:657;Page:6107] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I want to pick up the point that my colleague David Parker was referring to and come back to the detailed regulatory impact statement which is to be found only on the Treasury website. I repeat how disturbing I find it that the detailed analysis that this statement contains is not available to the general public by way of the Crown Retail Deposit Guarantee Scheme Bill which is the normal place to find the full regulatory impact statement. I think that is an undesirable course of action. 
I refer to a couple of matters that are in the statement. I would like the Minister of Finance to take a call to explain them. One of the matters is directly related to an issue that we were debating last night around collective investment schemes. First of all paragraph 26 of the regulatory impact statement states that “Blanket retail deposit guarantees are generally undesirable because of the economic distortions they create.” That is exactly the point that my colleague the Hon David Parker was making. “Economic distortions include encouraging guaranteed depositors and deposit taking institutions to make riskier investment decisions since gains are privatized and losses are socialised.” This is from Treasury which actually gets the problem that we face when we privatise the gains but socialise the losses. This has a huge distortionary impact on the market and is described as a moral hazard. 
I come to paragraph 43 which states: “There is a significant degree of uncertainty associated with what could happen if the current DGS is left to expire on October 2010. This reflects uncertainty about whether and how quickly the economy will recover over the next 18 months whether financial markets will continue to stabilize and what will happen to asset prices. It also reflects uncertainty about the position of entities in the scheme the extent of likely contagion resulting from the failure of any entities in the scheme and the extent of any possible deposit flight to Australian guaranteed banks due to the mismatch of guarantee periods. The impact will also depend in a large part on depositor sentiment which is very difficult to predict.” In the report the officials say that the banks do not think there is any risk of this flight to Australian guaranteed banks. I have to ask the Minister why we are doing this. I honestly think that some larger contribution to the debate could have been made if we had had a couple of days at the select committee where we could have debated the detail with officials. I am not saying that we are opposed to it; in principle we are not and we support the passage of the bill. But we think that it is an important issue that the Minister should respond to in some detail. The strongest argument for this change is in order to match with Australia yet the very reason why we would match with Australia is not regarded by the banks as a priority in the decision making in this area. In fact according to the regulatory impact statement the banks do not support the extension of this scheme. 
Last night I was asking the Minister in the chair—who was the Minister of Finance Bill English—about collective investment schemes. I said to him that these were not dealt with in detail in the regulatory impact statement. He referred me to page 20. Page 20 is one of the annexes to the regulatory impact statement. So yes the collective investment schemes are dealt with in this particular part of the statement. But I advise the House that the detail there does not answer the question that I raise. 
Let me again read into the record what the regulatory impact statement says: “Removing this limited category of CISs from the extended DGS’s coverage would be consistent with the core coverage of the DGS. 
It would also reduce one of the boundary issues that has arisen between CISs and other institutions (such as mortgage trusts)”— this was the point that my colleague the Hon David Parker was making—“with similar legal structures (but different investment approaches) that are not covered by the present DGS and result in slightly reduced administration costs associated with managing separate deeds of guarantee. There may be some shifting of investors from CISs to guaranteed deposits but this would be minimal.” What is that based on?