Webb DuncanFINANCIAL MARKET INFRASTRUCTURES BILLThird ReadingDebate resumed from 8 April.Dr DUNCAN WEBB (Labour—Christchurch Central): Thank you Madam Speaker. It's good to finally be here at this third reading of this important Financial Market Infrastructures Bill—a bill which as you will no doubt recall is about ensuring that the infrastructure that underlies the financial transactions in New Zealand is well maintained. One of the main aspects of this bill is to give powers of information gathering because as we know a lot of these transactions go on out of sight. And these settlement transactions and the payment systems which are absolutely fundamental to how our everyday finances work we only see what scratches the surface. But underlying it are these very important high-value high-frequency transactions that are undertaken often by private entities which provide the services that connect up the banks including the Reserve Bank. It's really important that the information is available to understand how strong those entities are and in particular whether there are any risks because the risk of failure in these instances is significant indeed. In fact if there were a failure of one of these settlement entities it could be catastrophic. So it's really important and this bill does it well to strike the balance between the ability to gather and use that information but at the same time protect it because that information is sensitive at a number of levels as all financial information is. Of course the other thing is that this designates institutions as subject to this regime because of course there are varying levels and this isn't about the banks themselves. It's about the clearance entities that underlie them right down to the providers of hard infrastructure because we know in fact there have been instances—and here we see it simply when we go to the shops and we go to pay for something and the EFTPOS terminal doesn't work. Now that might be a local issue but unbeknownst to many there have been issues in New Zealand where there has actually been a failure at an infrastructure level. Essentially the wire was cut and there's very fragile infrastructure in there. And when the payment system for the whole of New Zealand falls over even for an hour it's bad but if it happened for any longer than that it could have very very significant impacts on our financial institutions. Of course if the settlement of transactions between banks—if one bank can't settle its obligations with another bank then we have a risk of a cataclysmic failure and that is what this addresses. So it identifies those institutions which are critical to our financial infrastructure and it enables them to be regulated by this regime. The other thing it does is that if there is a problem if there is a crisis it essentially enables a moratorium and enables parties to come in and to take management to freeze the assets to settle where settlements are needed. You'll recall members the derivatives bill that we did not so long ago when we recognised the importance of settling derivative transactions even if there was a financial failure. Now this is the kind of thing we need to ensure here so that important settlements are made but that the assets are at the same time protected. The select committee did look at the bill and made a number of relatively detailed and technical recommendations but nevertheless important. So confirming for example in terms of that moratorium that it doesn't affect the statutory manager's obligations to pay claims under FMI rules—the financial market infrastructures rules—just things like that to make sure that the mechanism is there that it's working properly and that if the statutory manager does come in that it can shepherd the liquidation if necessary of that entity and it can ensure that the market itself the whole market structure essentially doesn't fall over. This is a technical bill but it's a really important one. It's one that you know the select committee worked really hard on had some very technical submissions but were well served by officials. So it's good to see that this bill is ready to go ready to have its final third reading. I commend this bill to the House.