Woodhouse MichaelHon MICHAEL WOODHOUSE (National): Thank you Mr Speaker. Can I begin by joining with the Minister of Finance in his thanks to everybody who's been involved in this. As he said it's been a long journey of over five years. In fact it's straddled virtually the term of this Government. I hope it'll bookend it but that'll be over to others.I was an interloper on the Finance and Expenditure Committee over the last few months and as a consequence I'm sure members of that committee will agree that this is a notoriously complex piece of legislation to get one's head around and for that reason we needed to rely very heavily on officials and the experts that were advising the committee. I think they did an excellent job in advising the committee but so too did the committee do a good job in taking that advice and turning the bill into a better shape. It came in in reasonably good shape; it's come out of that process in better shape.It's interesting to reflect on the fact that when it came in the winds of change have blown since then. Barbara Edmonds was the chair of the committee; she's now the Hon Barbara Edmonds Minister for Economic Development; Ingrid Leary a member of that committee is now the chair of the committee. The bill will get Royal assent tomorrow but many parts of it aren't going to come in for potentially months and in some cases automatically after four years if certain things haven't happened. There's every likelihood that we'll have a new Minister of Finance in that time maybe a new Minister of Economic Development—well definitely a new Minister of Economic Development if we get a new Minister of Finance. The point is that the sorts of banking and Reserve Bank monetary policy legislation does need to endure across administrations. It's important that legislation like this does have broad support across the House because if there is strong opposition to the things that the Government of the day is doing and we continue to yoyo from a policy perspective across Governments with this important fiscal and monetary in particular—monetary policy framework—then that is not good for banking stability.I'm pleased to note that actually in our history by and large certainly in the last 30 or 40 years we've had that. Now that's got some caveats in it I think as the Minister said. This is the trifecta. The first two bills did have some things that we had some serious concerns about to the degree that it may have been undermining the independence of the Reserve Bank and allowing the Minister of Finance to have perhaps a little more hands on influence than was appropriate. And time will tell whether or not that manifests but overall with those caveats there is broad support. Indeed the National Party will continue to support the Deposit Takers Bill at third reading.The Minister has talked about one of the significant changes that will be brought in by this and that is the introduction of the depositor compensation scheme effectively. And this is a really interesting issue. I don't call it a red-letter day I think it's probably slightly hyperbolic to describe it as that because there is the risk as had been kicked around by the select committee of the moral hazard that comes with such a scheme. Indeed with any investment whether it's cash deposits equities bonds buildings there is always a reasonably high correlation between risk and return. So for those people who are prepared to seek a higher return the corollary is that there will be a higher risk and it's of interest to me to see whether or not this will change behaviour in the retail deposit market once the depositor compensation scheme comes up. It is a caveat it's not an opposition to it.I think the other thing that is a bit of a caveat to me in this is the number and extent of powers that are being given to the Reserve Bank during a crisis. It's really important to imagine what—it's all very well to pass legislation in times of relative stability in our banking system but that can be upset. Indeed Mr Robertson and I did experience that. His Minister of Finance at the time the late Sir Michael Cullen was required to put in place the retail deposit guarantee scheme which the Hon Bill English enhanced and then had to call upon with the collapse of South Canterbury Finance. When that occurred I was a backbencher. By the time that was being mopped up I was in Cabinet.That was a particularly challenging period both for the country and for the Government to negotiate through that period. But the powers that are being given through this bill are quite strong: the powers to suspend debt payments to negotiate with creditors to suspend deposit repayments and cancel liabilities to creditors converting unsecured liabilities to equity. These are quite strong powers. Frankly if I was a depositor in a bank or a non-bank organisation that was on the brink of collapse converting my cash into a share is probably not something that I would be particularly enamoured towards. So these are quite broad powers that I hope we don't test for a very long time if ever.The other thing also that has troubled us to some degree is the extent to which the reach of regulation balances that risk with efficiency in the bank and non-bank market. Now I don't think that risk is as high as some of the other concerns I have but it is real that every time we put in place a levy or a requirement ultimately the costs of that fall on the customer. It's too easy to say Well the banks make billions of dollars and therefore they can pay." The fact is they do but they also have an enormous capital base and rates of return on capital are not nearly as extravagant as some in the media or in the Government might have thought. Ironically we're having a banking inquiry commencing at the moment on the basis not that our banks are at risk but that our banks are so strong they could be making hyper-profits.And this is one of the problems with what I call commodity products. If one thinks of things like petrol or cash in this case a deposit interest rate or milk or anything that's pretty generic if you like—we try and dress them up as different—what happens is that pure competition and pure collusion look almost exactly the same. It's really hard to tell one from the other. If when returning to Dunedin Dr Clark drives along Kaikorai Valley Road and there is at that time a price increase in petrol he'll notice that all four of the service stations along that road will increase or decrease their prices at the pump at the same time almost. Now does one suspect collusion? I don't. I know that's because of competition but it's really hard to tell the difference. And I think the banking inquiry will sort of run into this challenge that actually the banks that we have are strong and rightly so—we want a strong banking system—but they're also highly competitive. I hope that the introduction and passing of this legislation doesn't have the opposite effect of what we want and that is to reduce the number of players in the market at just the same time as we want to actually increase competition in our banking sector.The other thing about efficiency—and I see Dr Clark nodding. Although this is a criticism we do sometimes pass well-intended legislation that has unintended consequences. It's a score draw in that respect with I think the previous Government having passed anti - money laundering legislation that ended up being very very unwieldy and I think needs streamlining and simplifying so too the Credit Contracts and Consumer Finance Act has probably burdened stakeholders to a much greater degree than I think the Minister or the Government anticipated and there's still in my view some work to do there. I hope we don't add the Deposit Takers Act to that list of well-meaning but unwieldy pieces of legislation. The good thing I guess is that if we do have broad support across the House for the monetary policy framework that we have in our legislation if there are things that need to be improved in the future we can. But with that I have pleasure in confirming that the National Party will continue to support this bill at third reading."