Robertson GrantRESERVE BANK OF NEW ZEALAND BILLFirst ReadingHon GRANT ROBERTSON (Minister of Finance): I present to the House a legislative statement on the Reserve Bank of New Zealand Bill.Legislative statement published under the authority of the House.Hon GRANT ROBERTSON: I move That the Reserve Bank of New Zealand Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.This is the second of the trilogy of Reserve Bank bills that this Government has brought in the past and will bring in the future to this House. For those who haven't been following along closely at home the first of these bills which became an Act was the one that changed the objectives of the Reserve Bank to focus not just on price stability as important as that is but also on the concept of maximum sustainable employment. That first bill also changed the decision-making process of the Reserve Bank from the single decision-maker model of the governor making monetary policy decisions to a monetary policy committee. And that particular process has been in operation for a couple of years now and is working very well. The second part of the Reserve Bank review was to look at other matters in particular matters to do with financial stability policy other organisational matters and the regulatory framework for banks and other deposit takers. Such was the volume of work created by this review that it required not one but two further bills to be able to capture what has been done in the Reserve Bank Act review. So today I introduced the bill that is essentially about the institutional arrangements that will govern the Reserve Bank from here. Shortly into the new year we will introduce the third bill known as the Deposit Takers Bill. That particular piece of legislation will look at the way in which we regulate banks what the regulatory perimeter is for them how we work with other deposit takers and importantly it will also introduce a deposit insurance scheme—but that is for another day.What is in front of us today is essentially a piece of work to put in place better governance arrangements for the bank and a better process around it at achieving its financial stability objectives. What most people if they are thinking about the Reserve Bank think of is the official cash rate which is the manifestation of its monetary policy role. We have a monetary policy remit—it used to be called the policy targets agreement—which is negotiated between the Government and the Reserve Bank to govern that work. But what's happened over the 30-odd years that the Reserve Bank Act has been in place is that more and more tasks have been given to the Reserve Bank and they broadly speaking fit under the heading of financial policy—Hon Michael Woodhouse: By that Minister.Hon GRANT ROBERTSON: Some by me Mr Woodhouse that's true but in fact some by Ministers such as Bill English and others as well. So this role of how they regulate for example the insurance industry how they achieve their financial policy and stability roles has in fact—actually certainly up until now—been shared across the House. Perhaps Mr Woodhouse might have something different to say in a minute. That area of work—[Interruption] Oh that's true—has not been governed by the same kind of rules that govern monetary policy. So this bill is an opportunity to do that. Firstly as I say it's about strengthening the role of the board. The board of the Reserve Bank is going to take on a role more similar to what you see in other Crown entities. So it will have a greater level of responsibility for making sure that the bank is achieving the objectives in the Act. This has been welcomed by the Reserve Bank and indeed by those who do follow this closely as giving a greater level of assurance around what governance means—still always protecting the operational independence of the bank but making sure that the board plays an important role in governance. The second significant thing being done in this bit of legislation is the creation of a financial policy remit—and as I said we have one of those for monetary policy. Now the companion on the other side is a set of criteria an agreement between the Government of the day and the Reserve Bank on how they will go about their work when it comes to financial stability. And obviously this is a topic that's been in the news a little bit lately because one of the core elements that is often discussed when it comes to financial stability is the issue of the housing market. Clearly within the work that the Reserve Bank does it already considers those issues and those again who follow closely read the Financial Stability Report that the Reserve Bank puts out will notice that it is the bit of their work that is really about whether or not our financial system is robust what are the risks to it and how do we manage those risks. And so we will now have a financial policy remit that sets out the matters that the board has to have regard to given its role now in monitoring that work. The other area that this piece of legislation covers that is extremely significant in my view is legislative statutory recognition for the Council of Financial Regulators. I acknowledge my ministerial colleague the Hon Kris Faafoi in this regard who when he held the portfolio around commerce did a great deal of work to lift the role of the Council of Financial Regulators—that group its two major participants are the Reserve Bank and the FMA the Financial Markets Authority. This is the opportunity for us to ensure that the regulatory work we do is coordinated. While that might not sound that significant it has been extremely significant. In for example the work that was done in response to what happened in Australia with their royal commission on banking we were able to bring those ideas over and bring the Reserve Bank and the FMA together to be able to work on those matters. So the Council of Financial Regulators has existed for some time. What this bill does is actually give them statutory recognition give them more ability to be able to work across the system get cooperation make sure our regulation is actually fit for purpose and ensure that they work closely with other regulatory authorities such as the Commerce Commission and so on. There are some other matters in the bill that are tidy-ups of the regulatory roles that the bank has giving them adequate recognition. We've had a bit of a piecemeal approach over the last couple of decades of adding bits and pieces. This brings them all together in one place. This kind of work around financial stability is very important to New Zealanders' lives. It is very important to their wellbeing. All of us entrust the money that we have to institutions to look after. We need to know that those institutions are working in a framework that prioritises the wellbeing of our people but also their security and their stability when it comes to financial services. So this is something that matters to people's lives. In the last term of Parliament in Cabinet from time to time we found ourselves discussing some institutions who were struggling. And when we talked about those it was really important to remember the individuals the whānau who have money in a financial institution. They need to know that that is being secured and supported. That is primarily what this bill is about. It is about setting the framework for that having an arrangement between the Government and the Reserve Bank to make sure that those systems are developed well. So I commend this bill to the House. I invite members to read the statement to work their way through the technicalities of it. But I believe it is a good bill. I look forward to the select committee's consideration of it.