Westpac New Zealand Bill — First Reading 
Westpac New Zealand Bill — First Reading 
[Volume:630;Page:2300] 
Westpac New Zealand Bill 
First Reading 
Hon MARIAN HOBBS (Labour—Wellington Central) 
: 
 I move  
That the Westpac New Zealand Bill be now read a first time. 
 This is a private bill promoted by Westpac Banking Corporation for Parliament’s consideration. In accordance with the Standing Orders the notice of intention to promote this private bill has been distributed to those persons who have a direct interest in the subject matter of the bill. It has been advertised publicly and I commend it to the House. At the appropriate time I will move that this bill be referred to the Finance and Expenditure Committee. 
The bill provides a mechanism to enable Westpac Banking Corporation’s retail business in New Zealand to be vested in a New Zealand incorporated subsidiary: Westpac New Zealand Ltd. Westpac Banking Corporation has operated in New Zealand since 1861 and currently operates in New Zealand as a branch of its Australian parent. The establishment of a subsidiary enables Westpac to comply with the Reserve Bank of New Zealand’s local incorporation policy which was introduced in 2003. This policy provides that foreign-owned banks over a certain size are required to establish a New Zealand subsidiary with its own board of directors that is required to comply with New Zealand company law. 
The policy assists the Reserve Bank in its regulatory approach in two ways: first by reinforcing the importance of the self-discipline of banks by obligating bank directors to attest to the veracity of financial disclosure made by banks through their general disclosure statements. To date this has been done by Westpac’s Australian board and its New Zealand chief executive. Following incorporation it will be done by the directors of the locally incorporated bank which will include at least two New Zealand - resident independent directors thereby increasing some of the local accountability. Secondly the policy provides for greater legal certainty over ownership of the assets of the bank in the event of a bank failure under New Zealand law. This can help prevent a bank failure from spilling over to the wider financial system and developing into a systemic crisis. 
 Westpac and the Reserve Bank negotiated for some time over whether it would be necessary for Westpac to establish a subsidiary or whether another suitable solution existed. Ultimately the Reserve Bank was not satisfied that another suitable solution could be found and it has required Westpac to comply with its policy by establishing a locally incorporated bank. This bill provides for a new chapter in the long history of Westpac in New Zealand by creating the legal framework for the vesting of the assets of Westpac Banking Corporation’s New Zealand retail business into a New Zealand company: Westpac New Zealand Ltd. 
Westpac Banking Corporation has a significant history in New Zealand. It is one of New Zealand’s oldest financial institutions having begun life in New Zealand as the Bank of New South Wales in 1861. The bank expanded rapidly—it was the time of the gold rush—and was already operating out of eight branches throughout New Zealand by February 1862. In 1982 the Bank of New South Wales merged with the Commercial Bank of Australia which also had operations in New Zealand and the banking group became known as Westpac Banking Corporation or Westpac with the new name reflecting the bank’s focus on developing its business in the western Pacific region. In New Zealand the merger of the New Zealand business of Westpac Banking Corporation with Trust Bank New Zealand Ltd in 1996 led to the formation of Westpac Trust incorporating the two elements of the merged business. 
The relationship Westpac has with New Zealand is reflected in a number of ways from the historical buildings throughout the country that bear the original names of the Bank of New South Wales and the various regional banks that became trustee savings banks to the key sponsorships Westpac provides in sport the arts and through the red rescue helicopter. While Westpac has a long history in New Zealand of operating as a branch of its Australian parent company the Reserve Bank of New Zealand now requires for the purposes of satisfying its statutory objective to be in a position to minimise the impact on the financial system of a bank failure that systemically important banks—those that have $10 billion or more in liabilities in New Zealand other than to related parties—be incorporated in New Zealand. The retail business of the New Zealand branch of Westpac Banking Corporation currently fits this criterion; therefore Westpac is required to comply with this policy. 
Legislation is the only means by which the assets of Westpac Banking Corporation’s New Zealand retail business can be vested in Westpac New Zealand for two reasons. Firstly it is the only means by which Westpac Banking Corporation’s New Zealand retail business can be vested in Westpac New Zealand efficiently and economically without interference in the conduct and continuity of that banking business. That seamlessness is important and necessary for both the staff and the customers of Westpac. Secondly legislation is the only means by which appropriate amendments to and repeals of existing legislation can be effected as Westpac Banking Corporation currently operates under legislation in New Zealand through the Westpac Banking Corporation Act 1982. 
The private Act of Parliament approach has commonly been used for bank mergers in the past—for example the National Bank of New Zealand Limited Act 1994 and the Westpac Banking Corporation Act 1982. The bill is primarily based on a number of pieces of legislation that have facilitated transactions similar in nature to this one. The approach of using legislation to facilitate the vesting and a subsequent vesting order to contain the details of assets and liabilities to vest finds its origin in the health board model adopted in the Health Sector (Transfers) Act 1993 which in turn followed an approach previously used in the New Zealand Railways Corporation Restructuring Act 1990. 
The bill also contains provisions commonly used in merger legislation provisions previously used in bank merger legislation provisions specific to Westpac’s circumstances and provisions repealing section 23 of the existing Westpac Banking Corporation Act. Accordingly the bill provides the overall legal framework for the vesting of assets and liabilities from Westpac Banking Corporation to Westpac New Zealand. The vesting is then implemented by a detailed proposal that must be approved by the Governor-General on the recommendation of the Minister of Finance by Order in Council. The requirements of the proposal to be included in the vesting order are set out in the bill and are based closely on the health sector model. Given the level of detail required to specify the assets and liabilities being vested and the fact that the assets and liabilities of the business are constantly changing a vesting order is the preferable way to manage this complexity. 
The bill provides for Westpac New Zealand Ltd to be the universal successor to minimise the risk that the change of ownership would not be recognised where contracts are subject to foreign laws. A number of common merger provisions have been included in the bill such as provisions dealing with employees—the terms and conditions of employment are to remain the same continuity of employment is to be maintained and no claims arise from the transfer—provisions ensuring that the proposal does not place Westpac in breach of contract or of laws and provisions to ensure tax neutrality on vesting. In addition provisions specific to bank mergers have been included to ensure that the customer relationship will be unchanged contracts are fully enforceable by the new entity legal proceedings are not prejudiced and documents remain evidence. 
Finally the bill repeals section 23 of the Westpac Banking Corporation Act which gives New Zealand depositors priority over Westpac Banking Corporation’s New Zealand assets and requires the bank to have positive net assets in New Zealand. This section is no longer required as all of Westpac Banking Corporation’s retail deposit business will vest in and be conducted through Westpac New Zealand Ltd. Westpac New Zealand Ltd will be subject to direct supervision by the Reserve Bank of New Zealand and will have to comply with its policies. 
I have already referred to the practical considerations that underlie the necessity for this private bill. However in conclusion it may be useful to reiterate for the benefit of members some of these considerations. Without the legislation customers’ bank accounts in Westpac Banking Corporation could not legally be transferred unless each customer agreed to the transfer individually. That would cause considerable disruption not only to the beginning of the operations of Westpac New Zealand but also to all Westpac’s 1.3 million customers. On that basis I commend this private bill to the House and I am confident that the House will support it. At the appropriate time I intend to move that the Westpac New Zealand Bill be referred to the Finance and Expenditure Committee. 
JOHN KEY (National—Helensville) 
: 
 I rise on behalf of the National Party not to make a long address but just to say that the National Party will support this legislation. For the purposes of good order and pecuniary interest I declare that I am a customer of Westpac and I have been for 39 years since my mother opened an account for me in Canterbury and I got a passbook with I think a squirrel on the front. I have had that account with Westpac for 39 long and loyal years. 
The member for Wellington Central has made quite clear the purposes of the bill around the need for local incorporation and the need for Westpac to move beyond what is currently a branch structure in New Zealand. I understand that the Reserve Bank of New Zealand supports the bill and is likely to make a submission when it goes to the Finance and Expenditure Committee. 
Although I understand the position of the Reserve Bank on the ability to quarantine and understand what is a New Zealand asset—which becomes the legal position in the event of a New Zealand bank failure—I am a bit suspicious about what systemic bank failure may mean and what this legislation may achieve. In my own view in the event of the collapse of Westpac New Zealand the parent company would in all probability bail the bank out for reputational reasons if not for others. Anyway in that case it would still be easy to understand what the New Zealand assets were. 
This bill is in a sense forced on Westpac because the Reserve Bank wants to make sure that in the event of a parent company collapse the parent company cannot take New Zealand assets out of New Zealand and put them into Australia or into other parts of the banking group. I think we are somewhat deluded if we do not think that that scenario would not only lead to a systemic crisis across potentially all the other banks in Australia which run 85 percent of the banking system in New Zealand but also be a widespread issue for the Governments on both sides of the Tasman to deal with. I simply make the point as I have to the Reserve Bank that we need to look only at the Asian debt crisis—at how far away it was and at its impact on the credit spreads and the various financial indicators of the New Zealand banking system—to see the effect that a very distant financial crisis can have on New Zealand. 
That said I say National understands the legislation and what is driving it and we support its first reading. 
SUE BRADFORD (Green) 
: 
 The Green Party supports the introduction of the Westpac New Zealand Bill for the simple reason that our members believe the banking system operating in this country should be more under the control of this country. We support the policy of the Reserve Bank of New Zealand as noted in the explanatory note to the bill that systemically important banks should be locally incorporated in New Zealand. Although Westpac may find it necessary to make a giant leap in having to incorporate here including through this legislative process in reality this bill is only a small step in the long march for New Zealand to regain its economic sovereignty. 
I like many others was bitterly disappointed when the Trust Banks of New Zealand—with the exception of Auckland and Taranaki—were amalgamated and then privatised into Westpac’s grip. Those Trust Banks were synonymous with communities ordinary Kiwis’ mortgages and local economic development. Of course their assets continue to support the communities of this country but that is not the same thing as owning the bank and having some local control over local savings and investments. 
Let us see what has happened in the last 10 years since Westpac took over the Trust Bank network. In 2006 the prestigious Roger Award for the worst transnational operating in New Zealand went jointly to Westpac and the Bank of New Zealand. The judges’ report and supporting documents make sobering reading. Ten years ago Westpac—and Trust Bank which it later took over—employed 6760 staff. Today it employs 5004 staff. That is a reduction of 26 percent yet its profit of $617 million is 396 percent more than it was 10 years ago. So staff who used to make the bank an average $146000 operating income per year now need to make the bank $340000 operating income per year. Staff have been forced to become more than twice as profitable for their bank but their pay rates have risen by only 27 percent in those 10 years. 
The bank forces up its profits by setting sales targets for staff to meet. Those targets grow each year to match the bank’s greed for larger profits but the number of people employed to meet these targets falls. The number of Westpac branches has reduced in the last 10 years from 433 to 196 a reduction of 54 percent. This is despite Westpac’s total assets growing from $21 billion in 1994 to $42 billion in 2004 a growth of 100 percent. Net profit after tax for Westpac and Trust Bank combined grew from $155 million to $617 million between 1995 and 2005—a remarkable growth of 396 percent. 
One of the pressures on interest rates is banks such as Westpac using performance pay targets to compel their staff to sell higher and higher levels of debt to customers. The Governor of the Reserve Bank has expressed concern on this matter. Westpac chief executive Ann Sherry simply rejected the governor’s claims that banks are playing a role in fuelling inflation and suggested the bank was simply responding to customer demand. However Westpac customer service workers are set a target of 8575 points per year to meet performance standards. They get 10 points for opening a new account but an extra 25 points for selling a credit card. Westpac customer consultants are required to get 13305 points. They get 5 points for every $10000 of home loans they sell and 5 points for every $1000 of personal lending. No wonder we have an explosion of credit. 
At union meetings at Westpac over the last year workers have also complained of being unable to take holidays at the same time as their children and of being asked to return from holidays because their worksite was understaffed. Staff in entire offices have been working late or missing morning and afternoon tea breaks without compensation. There is a high workload causing stress and pressures on the families of workers. Workers are coming to work because of workload pressures despite their being sick. Bullying is not uncommon within Westpac. In one case a pregnant woman in the call centre was told she would have to make up time after work if she went to a specialist’s appointment. Her husband called her union FinSec distressed at this behaviour. A FinSec organiser subsequently informed the call centre team leader of that person’s responsibilities under the Parental Leave and Employment Protection Act. The team leader then demanded that the 20-week pregnant woman produce a doctor’s certificate to prove she was pregnant and that the specialist’s appointment was related to the pregnancy. 
Workers doing the late shift at the Phone Assist Call Centres in Auckland and Wellington do not get taxis home despite some of them not having cars and the fact that in Wellington there is no appropriate parking available anyway. Instead Wellington staff have been taxied to the train station at times despite the trains having finished running for the night. At one branch two staff members with outstanding performance records have gradually had their target review levels fall from five which is outstanding to one the lowest mark because they worked in a small town with a saturated market. They were put on performance improvement plans because of their low marks and threatened with transfer to another branch in a nearby town. Call centre workers are monitored so closely that when they make a 3-minute call to the union they have been threatened with having to make up that time after work at the end of the day. Call centre staff have also been spoken to for taking more than three toilet breaks during the day. If they spend more than 17 minutes not ready and available on the phone during the 8-hour day their quality assessment can be marked down thus potentially affecting their pay. 
The report of the Roger Award also outlined how Westpac along with all other big banks has used tax avoidance strategies to borrow overseas channel the money through New Zealand and re-lend it overseas. Through what the report described as a scam these banks are paying as little as 6.7 percent tax instead of the official company rate of 33 percent. This information came from Reserve Bank documents that were leaked to the media. Reliable estimates put tax owed by the “gang of four” at $1.63 billion dollars. The unexpected taxation windfall of $500 million announced by Dr Cullen prior to the last election is believed by some economic observers to have come from the major banks. 
Finally New Zealand Westpac customers of all political persuasions have to put up with the highly partisan and ideological comments made by Westpac chief economistBrendan O’Donovan. For all intents and purposes Mr O’Donovan acts as economic cheerleader for the National Party and is a constant critic of economic policies of Labour the Greens or any other of the Government support parties. There was blatant politicking from Mr O’Donovan prior to the election last year. To give one example before the election Mr O’Donovan attacked the student loan policies of Labour and the Greens and was subsequently forced to admit that some of the estimates he was using to cost the loan scheme were somewhat extreme. The then Minister of Education the Hon Trevor Mallard described Mr O’Donovan’s figures as inflammatory self-motivated garbage and stated that the bank had very selfish reasons for opposing the policy. Mr O’Donovan has also attacked the Working for Families package and strongly advocated unsustainable tax cuts. Recently he has even attacked the Government’s Buy Kiwi Made programme that I am responsible for before it has even been designed. 
I hope that select committee members take a good look at this bill when it reaches them. The fact that an Act of Parliament is needed to facilitate the incorporation of Westpac in New Zealand means that Westpac should have even more obligations to be a good corporate citizen and a good employer. Its corporate behaviour will have to change on a number of fronts. I urge the select committee to not just go through the motions of hearing submissions and reporting back on this bill; its members ought to have an obligation to determine whether the legislation will actually change the behaviour of this bank. If the bank will not change they should consider what amendments will be necessary to make sure that a bank relying on an Act of Parliament to incorporate in New Zealand actually does act as a good corporate citizen and a good employer. 
Hon BRIAN DONNELLY (NZ First) 
: 
 I want to take only a very brief call largely to explain that New Zealand First will be supporting this bill and also to give some reason for that. We believe the bill actually falls very much into the compass of New Zealand First philosophy and its raison d’être. We believe that some of the policies based around the acolytes of people like Roger Douglas and indeed Don Brash actually put the economic sovereignty of New Zealand at risk in times gone by and this is a move in the right direction to retrieve some of that economic sovereignty that was lost in the past. 
 I listened very carefully to the contribution made by Sue Bradford and I have to say I do not necessarily believe that the bill will change the business practice of Westpac New Zealand Ltd. However if the bill shuts up the taxation loophole that she mentioned in her speech then certainly it will be getting New Zealand First’s vote. We also take on board the point made by John Key that this move will mean that the parent company in Australia will not be able to take out New Zealand assets for example if it happens to get into trouble or fall over. New Zealand First will be supporting the bill to go through to the Finance and Expenditure Committee and we will listen to all the arguments that are put forward there. Fundamentally the real reason we are supporting the bill is that it is in line with New Zealand First’s philosophy of retaining New Zealand’s economic sovereignty. 
HONE HARAWIRA (Maori Party—Te Tai Tokerau) 
: 
 Before I speak on the Westpac New Zealand Bill I congratulate Sue Bradford on her comments outlining the requirements of corporate bodies in this country and in particular on highlighting concerns about working conditions holiday expectations and reductions in bank sites—particularly at a time when a company is making excessive profits. I particularly take those comments on board because I come from an area where the Government shut down all the post offices—so we have none. I feel the impact of the reduction of services and when I hear about banks doing the same sort of thing I am mindful of the need to keep tabs on how that happens and what we do about it. 
I return to my korero. Although I have no great love for the way in which the Reserve Bank’s directives impact on the poor in our land I do recognise the importance of ensuring that the biggest banks in our country are also incorporated here in Aotearoa. If those banks are charged with taking care of our money then the Maori Party believes that they should be keeping our money here and offering protection to their clients here as well. At the moment ANZ the National Bank BNZ and ASB are all incorporated here and this bill aims to bring Westpac into that fold. 
I am keen to speak to this bill because some issues in respect of Westpac have a particular positive focus for Maori. I will focus on three of those initiatives which other banks may want to pick up on as well. In particular Westpac held a series of hui to discuss the way in which to handle corporate social responsibility. Although Sue Bradford’s comments suggest that those discussions went in one ear and out the other the philosophy is an approach that is very much in line with the Maori Party’s kaupapa of encouraging ordinary people to be part of decisions that affect them. 
Maori are key stakeholders in any banking situation and we applaud any steps taken by any banking organisation to recognise that goodwill. As the MP for Te Tai Tokerau I can specifically acknowledge the Westpac initiative of helping Te Uri o Hau in the management of some $15.6 million in settlement assets with a practical project that assisted in iwi planning social services environmental and cultural initiatives and leadership development. I note a statement from a chief executive officer of the time who said that it is: “about recognising the importance of the contribution made to New Zealand by the Maori economy as a whole. Maori success is a broad economic issue not just for iwi and the Government but private enterprise as well.” 
The other project I wish to mention is a manual that Westpac published as a result of its work with Te Uri o Hau Ngati Whatua Ngai Tahu Tainui and other indigenous communities from other parts of the world particularly Canada. It helps tribes to determine best investment options. That publication entitled  
Let’s Settle This! 
 provides options to iwi to help them identify how best to grow settlements how to manage joint ventures how to develop commercial entities and how to manage education and social service programmes. I know those initiatives did not happen overnight and I do not suggest for one moment that Westpac is all sweetness and light. In fact the 1993 Maori Development Corporation report noted that cultural issues had not been addressed as well as they might have been by Westpac. But its progress in this particular regard is possibly a benchmark that other banks might take note of. 
Maori have been into banking since way back in the 1800s when they first cottoned on to the fact that there had to be something in this banking thing—otherwise Europeans would not be into it themselves. Indeed the prospectus of the Maungatautari Money House noted that Maori people had been viciously wronged in their dealings with Europeans who had largely profited thereby. It also noted: “our hearts are sorely grieved at this robbery of our people:” Apparently nearly every Maori in the area banked with the Maungatautari Money House but unfortunately it all came to nought when the money house and all its contents were lost in a fire. But the positive thinking was there. 
The Maori Party supports this bill and it is our earnest wish that local incorporation will be a continuation towards local development. Whanau are the ones best able to determine their own solutions and we support their right to do so. We urge all banking institutions in Aotearoa to be part of that solution. We look forward to the Finance and Expenditure Committee investigating some of the points that were raised by the honourable Sue Bradford and others and clarifying how some of those issues might be resolved not just by Westpac but by all other banking institutions in the country as well. At the same time we look forward to the select committee process promoting positive initiatives from within the banking fraternity as well and ensuring that Maori development is not held back by poor employment practices.  
GORDON COPELAND (United Future) 
: 
 I want to take a fairly brief call on behalf of United Future on the Westpac New Zealand Bill. Firstly I say we support the passage of the bill. There are two underlying rationales and reasons that Westpac should incorporate in New Zealand and therefore operate in this country through a separate subsidiary company of the international Westpac Banking Corporation. 
The first of those reasons has already been well canvassed by other members of the House and it is to do with the prudential supervision by the Reserve Bank. The Reserve Bank’s analysis quite rightly was that in the event that the parent company of what until now has just been a branch in New Zealand came under stress or God forbid failed then the people who had deposited with Westpac bank in New Zealand could be at a disadvantage. In fact because Australian rules are framed in a way that gives preference in that situation to the depositors who are Australian residents it is almost certain that through the existing branch structure New Zealand depositors would have been disadvantaged in that eventuality so this bill is necessary from that point of view. 
The second reason I welcome the bill is to do with taxation which has been touched on by Sue Bradford. It is quite clear as has been conceded by the Commissioner of Inland Revenue to the Finance and Expenditure Committee recently that the tax rate for companies which is lower in Australia than it is here is actually an incentive for Australian-owned companies operating in this country to manage their affairs to try to minimise their tax bill in New Zealand to the advantage of Australia; in other words there is no longer a level playing field. Therefore this incorporation will also make it much easier for the Inland Revenue Department to police its new thin capitalisation rules in order to ensure that the Westpac Banking Corporation pays its fair whack of tax and that currently means 33c in the dollar—and no less than that figure. 
 In that regard the track record of Westpac Banking Corporation in recent years and indeed other Australian-owned banks is less than impressive. As Sue Bradford has mentioned not only are they now under the new rules paying an extra $500 million per annum in tax than they were but in addition a significant figure—well in excess of $1 billion—is also in dispute with those banks. I think that is a scandal when compared with the fact that every nurse who is working in an intensive care ward in a New Zealand hospital every teacher who is teaching in our schools and in fact all of the Kiwi battlers out there pay their fair whack of tax because they have no choice. It is taken off them through PAYE. Good corporate citizenship in this country means paying one’s fair whack of the tax burden. 
I also must express my disappointment that 85 percent of our banking sector has ended up in the hands of Australians. In many ways we are a very naive non-commercial and non-savvy country when it comes to these kinds of things. The Australians of course have a four pillars policy in place which ensures that these banks will always be owned by Australians. They do not play by the kinds of rules that we played by when we decided to put these banks up on a block and let them go into overseas ownership. Of course we are left basically with the Taranaki savings bank which is a great bank and I am also a great fan of Kiwibank. I think it is good that Kiwibank is here and I wish it great success in the future because I believe we need to see an increasing share of the banking sector back into the hands of Kiwis. 
For all of those reasons I signal United Future’s support for the first reading of the Westpac New Zealand Bill. 
Hon MARIAN HOBBS (Labour—Wellington Central) 
: 
 First of all I want to thank my parliamentary colleagues for their support for this private bill. I also realise that I did not declare at the start that I too am a Westpac customer so I lay that on the table. I am looking for detailed work to be done on the bill by the select committee although I do not think it will necessarily be the detailed work that my colleagues Sue Bradford and Hone Harawira are asking for. However I do commend Westpac and the people who have drafted this legislation for setting out in clause 12 to provide tremendous protection for the bank’s staff. Too often in these situations staff conditions may change—those are protected in the bill as are the bank’s customers and the community. For the care that has gone into the drafting of this rather difficult legislation I commend them. I thank you Mr Assistant Speaker and I thank the House for its support for this bill. 
Bill read a first time. 
Bill referred to the Finance and Expenditure Committee.referred to Finance and Expenditure Committee