Norman Russel: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Norman Russel: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 20 March 2013. Volume:688;Page:8690. Text is incorporated into the Bound Volume.] 
2. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Minister of Finance 
: Will New Zealanders have money taken from their bank accounts to fund a bank bailout under his proposed Open Bank Resolution scheme? 
Mr SPEAKER 
: Before I call the Hon Steven Joyce my office has been advised that this answer may be somewhat longer than normal because it contains quite some detail for the member. 
Hon STEVEN JOYCE (Acting Minister of Finance) 
: 
 I do not agree with the way the member has characterised the open bank resolution scheme. In the highly unlikely event that a New Zealand bank failed and went into statutory management the open bank resolution scheme would actually help depositors. The bank would reopen the next day and customers would have full or partial access to their funds which would then be Government guaranteed. That situation should be compared with two alternatives that would be on offer. One is that the bank would go into liquidation and customers may not have access to any of their funds for a long period. The other would be that the Government bail out a bank with taxpayers’ money and that comes with potentially enormous fiscal costs as we have seen with some countries in Europe. But again could I stress that this is a very unlikely situation. Our major banks are amongst the most highly rated in the world. They are well capitalised and have come through the global financial crisis in very good shape and since then regulatory changes have strengthened New Zealand banks even further. 
Dr Russel Norman 
: I raise a point of order Mr Speaker. The question was quite specific—will money be taken out of their bank accounts to fund a bank bailout? I am still no wiser as a result of the Minister’s answer. 
Mr SPEAKER 
: The answer was very fulsome. Does the member have further supplementary questions? You can delve into it with your supplementary questions. 
Dr Russel Norman 
: What amount is likely to be taken out of mum and dad savers’ accounts under his open bank resolution scheme: will it be 10 percent of their savings 20 percent of their savings or whatever it takes? 
Hon STEVEN JOYCE 
: I have got to say that I am actually quite horrified at the member’s scaremongering at this point. It is a highly unlikely situation that the member suggests. The open bank resolution scheme is designed to protect the interests of depositors in the very unlikely situation that a New Zealand bank fails. I think scaremongering mum and dad investors about the sorts of percentages they might lose à la what has happened in Cyprus which is an entirely different situation is actually pretty irresponsible. 
Hon Clayton Cosgrove 
: Having guaranteed the big end of town with the covered bonds legislation currently moving through the House will he commit to implementing Labour’s proposal to protect the deposits of ordinary New Zealanders which would ensure that the first $30000 of all bank deposits is guaranteed; if not why not? 
Hon STEVEN JOYCE 
: I actually struggle with the member’s question because I am pretty sure sitting in this House over the last 3 years or 4 years that the member and his colleagues have been massively critical of the outcome of the Government’s bank deposit scheme in terms of its protection of finance companies’ depositors. Now suddenly he is of a view that somehow the Government should step in again and protect depositors— 
Dr David Clark 
: Hundreds of millions of taxpayer dollars wasted. 
Hon STEVEN JOYCE 
: No it was not wasted—it was not wasted at all. It was actually protecting the interests through the Crown Retail Deposit Guarantee Scheme of New Zealand depositors. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. With respect that did not even get anywhere near the question. I simply asked whether having guaranteed the big end of town through the covered bonds legislation he would commit to implementing the proposal we have put forward. He talked about the Crown Retail Deposit Guarantee Scheme and responded to an interjection but he never answered or even addressed that question. 
Mr SPEAKER 
: The Minister said he did not accept the proposition that was put by the member. If the member wishes to ask further supplementaries he has the ability to do so. 
Hon Clayton Cosgrove 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: Is the member questioning my ruling? 
Hon Clayton Cosgrove 
: No. 
Mr SPEAKER 
: Then it is a fresh point of order? 
Hon Clayton Cosgrove 
: It is Mr Speaker. 
Mr SPEAKER 
: And it is not to do with the question that has just been answered? 
Hon Clayton Cosgrove 
: The Minister said he was struggling Mr Speaker— 
Mr SPEAKER 
: Order! That is now relitigating the decision I have just made. 
Dr Russel Norman 
: Is the Minister saying that it is not part of the open bank resolution scheme to access depositors’ accounts in order to fund a bank’s bailout? 
Hon STEVEN JOYCE 
: I think possibly it might be helpful for the House given that the member has raised the issue to take it through what actually does occur with open bank resolution which addresses the member’s question. Open bank resolution is one option for responding if a bank failure occurs. It actually helps depositors because it allows for a bank to reopen the next day hence the name “open bank resolution”. It means that customers would be able to get full or partial access to their accounts and other banking services while an appropriate long-term solution to the failure of a bank is identified. Some of their deposits could be frozen in the short term but the remainder would be available on the next business day and would actually be Government guaranteed. If you look at the alternative—if a bank went into liquidation—that process would be complex and time-consuming during which time customers would not have any access to their funds. In any event the first losses will be borne by the bank’s shareholders. The open bank resolution follows the usual order of credit preference as much as possible. It is also not intended to be the only option in the event that a bank got into difficulty. I would also point out to the member that this has been in the public domain since 2011 and has been raised and addressed by the Reserve Bank a number of times since then. 
Dr Russel Norman 
: I raise a point of order Mr Speaker. Question time does not make sense if it is not also answer time. It was a very direct question— 
Mr SPEAKER 
: Order! [ 
Interruption 
] Order! That was a very genuine attempt by the Minister—[ 
Interruption 
] Order! I am on my feet and if members want to stay to see the whole of question time they will be silent while I am on my feet. The Minister made a genuine attempt to explain open bank resolution. The answer may not be to the satisfaction of the member. The member has at this stage further supplementary questions if he wants to use them. 
Rt Hon Winston Peters 
: Could I ask the Minister why he would prefer an open bank resolution scheme which in part or wholly in extreme circumstances could see the depositor having all their money stopped from their use rather than a very sound scheme announced by me in October 2008—[ 
Interruption 
] Well we were there before you even did the ballot OK? 
Mr SPEAKER 
: Order! 
Rt Hon Winston Peters 
: In 2008. It would have this effect: it would have the effect of a Government guarantee for the first $100000 of a deposit in a New Zealand - owned bank. 
Hon STEVEN JOYCE 
: I could think of a number of issues with the member’s proposal immediately because what he would be proposing to do would be to guarantee a certain number of deposits in a New Zealand - owned bank which would mean that suddenly all the money would move particularly in a difficult situation like we have with the global financial crisis from other banks that were not necessarily New Zealand owned and that would collapse the other banks which I do not think would be in the interests of the financial stability of the New Zealand economy. 
Rt Hon Winston Peters 
: They’re all foreign owned. 
Hon STEVEN JOYCE 
: Right so we should actually—here is what Mr Peters is suggesting in a xenophobic way. It is that we should collapse all the foreign-owned banks into the New Zealand—thank goodness he was not in Cabinet during the global financial crisis. 
Dr Russel Norman 
: Will he guarantee that mums and dads will have at least $1000 left in their accounts after an open bank resolution of a failing bank? 
Hon STEVEN JOYCE 
: The member is deliberately scaremongering yet again about the New Zealand economy. What I can say to the member is this— 
Dr Russel Norman 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: It is a relatively easy question to answer. 
Dr Russel Norman 
: It is a straight question. He started abusing me—for what? He should just answer the question. [ 
Interruption 
] 
Mr SPEAKER 
: Order! Would the Minister please answer the question. 
Hon STEVEN JOYCE 
: Well the member raises a hypothetical that is just impossible to answer because he suggests that everybody should get $1000 out whether or not they have got it in there. The point is this: in the very unlikely event that a bank falls over there are three options. One is that people lose their shirts. The other option is that the taxpayer pays. The third option is the open bank resolution scheme which ensures an orderly process that actually has the best chance of protecting a depositor’s deposits. Those are actually the options on the table. The member has criticised the idea of taxpayers bailing out depositors. He is presumably not in favour of depositors losing their shirts so can I suggest to him that he look closely and positively at the open bank resolution scheme. 
Dr Russel Norman 
: So can the Minister please explain to me whether his answer to my last question—will he guarantee that mums and dads will have at least $1000 left in their accounts after open bank resolution—was no? 
Hon STEVEN JOYCE 
: The point is that it is hypothetical and it actually does not take into account anybody’s situation. Look I appreciate that the member would just print some money and give it back to the depositors but actually—and here is a guy who claims to be concerned about people’s deposits— 
Dr Russel Norman 
: I raise a point of order Mr Speaker. It was a straightforward question the Minister had answered it—time to wrap it up. 
Mr SPEAKER 
: It was a very political question and it got a very political answer back again. 
Dr Russel Norman 
: Why does he not draw a strong line in the sand and protect mum and dad deposits as they do in Australia and the United States using deposit insurance and pick a minimum that would be protected such as $250000 as is the case in Australia and the United States? 
Hon STEVEN JOYCE 
: This is a member who is arguing against taxpayers stumping up for deposits one minute— 
Dr Russel Norman 
: I raise a point of order Mr Speaker. 
Mr SPEAKER 
: Order! Would the member please repeat his question. 
Dr Russel Norman 
: OK. Why does he not draw a line in the sand and protect mum and dad deposits to a certain minimum level such as $250000 like they do in Australia and the United States? It is a simple question. 
Hon STEVEN JOYCE 
: I was pointing out to the member that what he is proposing is that effectively taxpayers stand behind those depositors which is what happens as I understand it in these offshore arrangements. He is also proposing— 
Dr Russel Norman 
: No. 
Hon STEVEN JOYCE 
: Well even if it is not the taxpayers then all he is going to do is make the depositors pay insurance every year for ever against the unlikely event of this actually occurring. Actually the far bigger issue the depositors would have with the value of the deposits would be if the Government got out the printing presses and printed money and inflated away the value of the deposits. 
Dr Russel Norman 
: Why does he propose stealing savers’ money while they sleep when a fairer alternative would be to have the banks pay to insure themselves against failure like they do in nearly every other OECD country? 
Hon STEVEN JOYCE 
: I am sorry that is a preposterous political statement suggesting you would steal money from people’s accounts. The member is outrageously scaremongering once again in his own political interests. He has an appalling take on the New Zealand economy. How he thinks that what he is proposing now fits with his idea to print money and inflate away the value of people’s deposits is actually completely beyond me. It is totally inconsistent. 
Dr Russel Norman 
: I seek leave to table a letter from January this year seeking information under the Official Information Act from Treasury about open bank resolution alternatives that it has explored—a letter that has not been met yet. 
Mr SPEAKER 
: A letter from the member himself? 
Dr Russel Norman 
: It is from my researcher to Treasury. 
Mr SPEAKER 
: Leave is sought to table that letter. Is there any objection? There is objection. 
Dr Russel Norman 
: I seek leave to table a letter from the Reserve Bank back to us saying that it would not be meeting our request within the time frame because it does not have the information yet. 
Mr SPEAKER 
: Leave is sought to table a letter from the Reserve Bank back to the Green Party. Is there any objection to that letter being tabled? There is. It will not be tabled.