Robertson GrantDEPOSIT TAKERS BILLSecond ReadingHon GRANT ROBERTSON (Minister of Finance): I present a legislative statement on the Deposit Takers Bill.DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon GRANT ROBERTSON: I move That the Deposit Takers Bill be now read a second time.I want to take this opportunity to thank members of the Finance and Expenditure Committee for their hard work on the Deposit Takers Bill. It is a piece of legislation that is very important and significant for a number of reasons that I'll talk about in the coming minutes. But I also want in light of the recent outbreak of unity across the House—or near unity—in the last piece of legislation just to credit all members of the Finance and Expenditure Committee for the way in which they undertook their work on this bill. They made a number of changes that I believe are both important but also in keeping with the spirit of the legislation and I do acknowledge the Finance and Expenditure Committee members for doing that.Just to recap briefly this is the third in the trilogy of pieces of legislation that emerged out of the review of the Reserve Bank of New Zealand Act that we undertook on first coming into office at the end of 2017. The first two bits of that legislation dealt with the objectives of the Act and the decision-making powers of the Monetary Policy Committee; the structure of the Monetary Policy Committee. Then we moved on to the administrative side of the bank's operation including the role of the board of the Reserve Bank. And finally this piece of legislation the Deposit Takers Bill. This is a very important bit of legislation in terms of the way that our prudential and regulation and supervisory environment for our banks—and indeed our deposit-taking sector in general—operate. It is a piece of legislation that seeks in large part to modernise the way in which this legislation works with respect to deposit takers and with respect to the standards that they operate under.It also does something that is extremely important in that it establishes a Depositor Compensation Scheme. I can tell you that earlier in the year when we saw issues arising with Silicon Valley Bank and Credit Suisse and others the emails began to come in with increasing regularity from New Zealanders wondering when this piece of legislation would be passed. This is something that is I would say beyond time for Parliament to catch up with and I am very pleased that we had this work well under way so that it can be passed through the House. I hope it will move swiftly through the House from this point and then be able to come into operation fully next year once some of the further consultation work by deposit takers is done. It is important that New Zealanders have confidence in the financial system in which they put their money. They can have confidence in that system; it is a robust system—it has been analysed time and time again to be so—but that does not stop people wanting the confidence that there is some kind of backstop scheme for their deposits. And that is precisely what the Deposit Compensation Scheme is designed to do.I'll just spend a little bit of time on this aspect of the legislation before returning to talk about a couple of the amendments that the select committee made that I believe are very important ones. I note that the absence of a deposit protection or compensation scheme is something that's been on the agenda for some time and something that many New Zealanders would want. We are in fact one of only two OECD countries without some form of deposit protection scheme and establishing this scheme is a major element of the reform process I mentioned at the beginning. What the scheme does is it aims to stabilise New Zealand's financial system by providing each eligible depositor with $100000 of compensation protection for their protected deposit at each deposit taker. The estimate we've had is that this will cover more than 90 percent of depositors. Broadly speaking compensation will be payable when a deposit taker is in difficulty that causes disruption to the ability of eligible depositors to access their protected deposits.As most people will understand setting up a fund like this requires it to be funded and that will be done by charging levies to those deposit takers. This is backed up by public funds should the balance of the Deposit Compensation Scheme fund be insufficient to meet its compensation obligations. It is a significant new function for the Reserve Bank and I think we should acknowledge that as the Reserve Bank now has the role of collecting levies managing the fund determining entitlements and making compensation payments. But it is an important further rung in making sure that people are aware of what is needed when it comes to protecting our financial system. I think most submitters were in support of the legislation in this respect but it is going to take a little bit more time to make sure it's fully put in place as banks finalise the way in which they make their payments they make their levies and the Reserve Bank puts the scheme together. But we are now moving to put ourselves in line with the rest of the world when it comes to these sorts of schemes and I do think it's something on this side of the House we're proud to be able to bring forward—albeit acknowledging that our financial system and the health of our financial system is sound. There always has to be a worst-case scenario plan and this is it.I would note that in the recent past when New Zealanders have been faced with financial institutions that have collapsed or have in some way or other not performed as they had hoped they did look to the Government to find a way to support them rather than having to deal with that in an ad hoc way. What this legislation does is ensure that we have a comprehensive scheme that deals with the way in which that will play out. So on that particular clause of the bill I am very proud to see it come forward. A number of the other provisions in the bill are essentially addressing recommendations made by the International Monetary Fund when they reviewed New Zealand's financial regulations in the 2016-17 year. That creates a broader framework for regulation and supervision of our deposit takers. In doing so it elaborates the objectives for a new regime modernises the licensing processes provides for a range of prudential standards expands the suite of supervisory and enforcement tools and improves the crisis management and resolution framework. All of these might sound technical to people that are out there but it is essentially the underpinning of the schemes that New Zealanders put their money in—and they need to have confidence that at every stage and at every level there is proper supervision and proper regulation around that.I think again that both the work that we did through the review and the work that the committee has done has ensured that that framework is now in place and does give confidence to New Zealanders about the way in which that work will be done. The Reserve Bank itself has its objectives as a prudential regulator enhanced by this legislation as it did when we did work on its monetary policy role in that regard as well. It also modernises licensing to ensure essentially that the deposit takers themselves are able to move reasonably swiftly through that process. As I said before it strengthens a number of standards that are required in order to meet the prudential rules of the Reserve Bank. Areas where standards may relate to include governance remuneration of directors and senior managers capital liquidity security interests credit ratings loan concentration risk exposure risk management disclosure and internal controls and assurance. All of those are things that essentially happen behind the scenes at a bank or a deposit taker but they're areas where we do need greater confidence and I'm very pleased to be able to see them come through in this legislation as well.I just want to finish by reflecting on really the critical changes that I think the Finance and Expenditure Committee have made in particular the changes to the purpose and principles clauses that the committee has made around essentially proportionality but also ensuring accessibility of financial products and services. This is important because along with making sure that we have a sound financial system and one in which the public can have confidence we also want to make sure that the public have access as well. So there is now a new subclause within the purpose clause that says to the extent not inconsistent with [those soundness and safety objectives] to support New Zealanders having reasonable access to financial products and services provided by the deposit-taking sector." I regard that as a very significant and important change that the committee have advocated for.That's then backed up as we move through the clauses of the bill into the principle section where a new principle has been added saying that the deposit-taking sector comprises "a diversity of institutions to provide access to financial products and services to a diverse range of New Zealanders." That again is important. While we all know—and it's laid out and in the hierarchy of the Act—that having a safe and sound financial system is the goal of this legislation adding to that the fact that within that accessibility is important and that a diversity of institutions provide services to a diverse range of New Zealanders I think enhances this legislation makes it more relevant for the times we live in and I want to thank again the committee for that work that they did.In the interests of time I won't be able to go into the proportionality framework but I know other speakers will do that when they speak. This bill has been—Hon Member: Yes we will.Hon GRANT ROBERTSON: —as I'm sure they will. This bill has been improved by the select committee I think it is an important piece of legislation and I look forward to its swift passage from here into law.DEPUTY SPEAKER: The question is that the motion be agreed to."