Coleman Jonathan: Non-bank Deposit Takers Bill — Second Reading 
Text is subject to correction 
Coleman Jonathan: Non-bank Deposit Takers Bill — Second Reading 
[Sitting date: 02 August 2012. Volume:682;Page:4248. Text is subject to correction.] 
Hon Dr JONATHAN COLEMAN (Associate Minister of Finance) 
 on behalf of the Minister of Finance: I move  
That the Non-bank Deposit Takers Bill be now read a second time 
. I want to begin by thanking the members of the Finance and Expenditure Committee for their prompt handling of this bill. The committee received nine submissions and heard from four submitters. This bill seeks to implement the final components of a new regulatory regime for non-bank deposit takers which are referred to as NBDTs and comprise of the main finance companies building societies and credit unions. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I apologise for doing it during a changeover in the Chair but there was another changeover that also occurred. You properly called the Minister in charge of the bill who was in the House at the time and was here for at least a minute afterwards. I wonder how it is possible for another Minister to get the call in such circumstances. 
Mr SPEAKER 
: The member makes a perfectly valid point. It is not the first time that this has happened in the last couple of weeks where a Minister in charge of a bill has been in the House and not actually intended to take the call and the Speaker as a consequence has called on the face of it the wrong Minister. I called the Minister who was in charge of the bill who was present in the House and they then sought to leave saying “Oh no someone else is handling this.” I have called the Hon Dr Jonathan Coleman now and he is now leading the second reading on this bill but I think the point is well raised. I say to Government Ministers that they need to be watchful of this. It is not good enough to have a Minister in charge of the bill in the House and have another Minister seeking the call to lead off the second reading debate or whatever the particular debate is that requires the Minister in charge to be dealing with the bill. The point is well made and I would rather not see it happen again. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. Can I seek an assurance that in future your practice will be to comply with the Standing Orders and call the Minister who is in charge of the bill notwithstanding the fact that they are indicating that they are leaving? 
Mr SPEAKER 
: Again the member is correct that strictly the Speaker should do that so I have I guess let the Government off on a couple of occasions in recent times by deferring to the Minister who is obviously intending to handle the bill in the second reading. I alert the Government that strictly I should not do that. The Hon Trevor Mallard is absolutely correct. That is why I do not want to see it happening again. 
Michael Woodhouse 
: I raise a point of order Mr Speaker.  
Mr SPEAKER 
: I will hear Michael Woodhouse briefly. 
Michael Woodhouse 
: Thank you; it will be brief. I think we run the risk because there is a transition at the end of question time for which many members are required to attend parliamentary business in other parts of the building. What we risk doing is having Ministers leaving before the end of question time and I think that runs the risk of disrespecting that very important part of the parliamentary process. So although I will certainly counsel Ministers to ensure that this does not happen again I would be disappointed if it did result in that occurring. 
Mr SPEAKER 
: Order! I simply repeat to the senior Government whip that the Standing Orders are the Standing Orders. It is not difficult for a Minister mindful of the Order Paper to leave at an appropriate time. The only time I could possibly see where it would cause a problem is if the Minister is answering the last question on the question sheet and it is the first business coming up. But there is a small pause as the Clerk announces the reading as the Speaker closes down question time and Ministers just need to be mindful of their responsibilities in that regard. The Hon Trevor Mallard has raised a perfectly proper point and he reprimands the Speaker appropriately. I have not strictly applied the Standing Orders and maybe in the future I should. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker.  
Mr SPEAKER 
: I will hear the member briefly. 
Hon Trevor Mallard 
: I want to make it clear right now that I am not sending you from the House; you were going to do it anyway. 
Hon Dr JONATHAN COLEMAN 
: What I was saying is that the bill seeks to implement the final components of a new regulatory regime for non-bank deposit takers and this is with the aim of promoting a sound and efficient financial system. It incorporates the prudential requirements already imposed under Part 5D of the Reserve Bank of New Zealand Act 1989. It also introduces new measures including the licensing of non-bank deposit takers suitability assessments for directors and senior managements restrictions on changes of ownership and new powers for the Reserve Bank to detect and manage instances of distress or failure of non-bank deposit takers.  
The bill continues with a broad definition of “non-bank deposit taker” in order to allow for potential changes as a result of market innovation while leaving scope for some entities to be exempted or declared out of the full regime. This definition targets the substance of deposit taking to ensure the activity is captured instead of particular types of organisations. The committee has recommended a number of refinements to this definition to clarify the scope and application of the bill. If a person was a deposit taker under Part 5D of the Reserve Bank of New Zealand Act before the bill comes into force or is a non-bank deposit taker under the bill once it takes effect the person will remain a non-bank deposit taker until all the debt securities it had issued are repaid. The new definition will not capture those entities that were not deposit takers before the bill’s introduction unless their activities mean that they have begun to meet the definition.  
An amendment has also been made to ensure that those entities the bill specifies as not being non-bank deposit takers such as registered banks remain outside of the regime regardless of whether they are otherwise caught by the refined definition. However the bill acknowledges that this definition might at times be too broad or too narrow. It does so by including a regulation-making power that would allow persons to be declared to be or not to be non-bank deposit takers. This has been amended to allow the Governor-General to specify additional detail and regulations as to the circumstances in which a person or class of persons is or is not a non-bank deposit taker. This approach provides useful flexibility to respond to market changes and to exercise control when circumstances mean that control is required. Regulations may also declare certain securities to be debt securities for the purposes of the bill. The Reserve Bank must not recommend such regulations unless satisfied the securities are similar in substance to debt securities. This is to ensure that other forms of investment vehicle such as collective investment schemes are not inappropriately captured.  
This bill introduces a licensing regime for non-bank deposit takers. The committee has recommended an amendment in relation to applications for licence by overseas persons for the Reserve Bank to have regard as to whether specified aspects of the law and regulatory requirements of the applicant’s home jurisdiction are satisfactory.  
Licences may be issued subject to conditions. The bill sets out the consultation procedure to be followed if the Reserve Bank wishes to add new conditions or amend or revoke existing conditions of licence. An amendment has been made so that the procedure does not apply when imposing conditions at the time the licence is initially issued. The committee has added an express obligation for non-bank deposit takers to comply with the conditions of their licence so that a failure to comply with a licence condition becomes a failure to comply with the Act. Breaching such a condition will be grounds for cancelling a licence. As trustees are the direct supervisors of non-bank deposit takers if the Reserve Bank intends to cancel a licence then it must notify the trustee of that intention and also notify the trustee if a licence is to be cancelled.  
The committee has recommended an amendment to the Government requirements that were in Part 5D of the Reserve Bank of New Zealand Act to clarify that if non-bank deposit takers include provisions in their governing documents that would allow directors to act other than in the best interest of the non-bank deposit taker then these are of no effect. The change of ownership requirements have also been clarified. These stipulate that the prior consent of the Reserve Bank must be sought for any transaction that would result in a person increasing their level of influence above a specified level or above the level previously authorised by the Reserve Bank.  
This bill enhances the powers of the Reserve Bank in respect of non-bank deposit takers and their associated persons. These include a direction-making power which has been amended so that the same range of directions are able to be given to non-bank deposit takers and their associated persons. The Reserve Bank can direct that a non-bank deposit taker replace its auditor and the committee has recommended amendments to ensure the non-bank deposit taker is able to comply with such a direction. In situations where a direction requires the trustee to disclose information the committee has recommended that trustees be protected against any civil criminal or disciplinary proceedings arising from such disclosure. The Reserve Bank is also able to remove and appoint directors where the non-bank deposit taker is in financial difficulty or is failing to comply with statutory requirements.  
The bill now provides that the Reserve Bank must give reasonable notice of its intention to remove a director as opposed to notice with a minimum period specified. Notice must also be given to the non-bank deposit taker’s trustee. The committee considered that in some cases it might be desirable to appoint an additional director without first removing an existing one and the bill has been amended accordingly. Where the Reserve Bank has made a decision regarding the suitability of directors or senior officers those persons have a right to appeal that decision. This has been amended to allow appeals by those who were proposed to be directors or senior officers but were prevented from doing so by a Reserve Bank decision on their suitability.  
The committee has introduced a new clause carried over from the Reserve Bank of New Zealand Act that allows the Minister to direct the Reserve Bank to have regard to a Government policy related to the Reserve Bank’s functions. A new clause has also been introduced in relation to incorporation by reference. This will exclude material that is made or issued in New Zealand is made under the authority of an Act and is freely available from the need to be certified and made available by the Governor of the Reserve Bank. It is necessary for the governor to certify corrected copies and make them available only if they originate outside New Zealand.  
There have also been a number of minor drafting changes. Technical changes have been made to the offence provisions throughout the bill to align more closely with the approach in the Criminal Procedure Act 2011. The bill includes a 12-month transition period for the licensing of existing non-bank deposit takers. As non-bank deposit takers are also required to be on the Financial Service Providers Register the committee has recommended delaying the commencement of some of the consequential amendments to the Financial Service Providers (Registration and Dispute Resolution) Act 2008 to allow for the licensing transition period.  
Once again I would like to thank the committee members for the work they have undertaken on this bill. It has been significantly enhanced through the committee process. It will increase confidence in the New Zealand deposit-taking sector helping to maintain a sound and efficient financial system. I commend the bill to the House.