Woodhouse Michael: Non-bank Deposit Takers Bill — First Reading 
Woodhouse Michael: Non-bank Deposit Takers Bill — First Reading 
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MICHAEL WOODHOUSE (National) 
: 
 Like one or two of the members of this House I spent a small portion of my pre-parliamentary career in banking. In fact I joined a trading bank as they were then known after leaving school. I spent about 5 years in reasonably low-level roles but I ended up at the end of that time in the role of retail— 
Hon Trevor Mallard 
: He makes very good tea. 
MICHAEL WOODHOUSE 
: Well I started as the banking junior. I stamped the cheques folded the bank statements and made tea for the manager of the branch so it is— 
Aaron Gilmore 
: Look how far you’ve come. 
MICHAEL WOODHOUSE 
: That is right—from those humble beginnings. I ended up in the role of retail lending in the Lower Hutt branch of the National Bank in the 1980s lending mostly to small to medium sized enterprises and arranging mortgages for homeowners. As members may recall the interest rates in the period of about 1986-87 got up to 20.5 percent so it was pretty important to get the lending decisions right. 
I was trained in what would now be described as the old-school financial disciplines which I recall as the canons of lending. The acronyms are various but we referred to them as the five Cs which were cause cost collateral character and capacity: what did the people want the loan for how much would it cost how much are they putting in were they good people to lend to and what was their capacity to repay. If the applicant fell outside some fairly tight financial constraints then the lending application would have to be referred to head office. 
My how times have changed and they have changed in a couple of ways. Firstly the approach of lenders has moved away from that cautious approach to very much a sort of a sales approach with reports now of bank staff being awarded bonuses for the quantum of the lending that they do. That is in marked contrast to the old banking joke “Were it not for the fact that you needed the loan quite so badly we might be able to give it to you.” 
I think the second change is in the complexity of some of the lending products that are offered. They are not the sort of straightforward lending to borrowers for bricks and mortar subject to a mortgage. We have seen a lot of speculative products on developments that are still on the drawing board being purchased often by naive investors in anticipation of a rental income or a capital gain—a capital gain I might add that under the current tax framework would be taxable. That came as a bit of a surprise to investors in Central Otago when the Inland Revenue Department descended on that area and started issuing assessments. 
I mention all of that because although this bill is called the Non-bank Deposit Takers Bill it is really not about the taking of deposits at all but about what then happens to them in the on-lending. We are replete and many members have already spoken about the many— 
Hon Trevor Mallard 
: We’re convinced. 
MICHAEL WOODHOUSE 
: Very good. Well that never stopped the member over there from carrying on his speech however unconvincing or convincing he might have been. But there are many tragic examples— 
Hon Trevor Mallard 
: I’m slain through the heart. 
MICHAEL WOODHOUSE 
: That is withering. That is withering. He is absolutely a cutting wit. I have never been called inept I have to say—certainly not in this place—but the member can wear it like a badge of honour I am sure. 
Clare Curran 
: I’m sure it’ll come. 
MICHAEL WOODHOUSE 
: Thank you for the vote of confidence and a Nostradamus-like prediction. But it is a serious issue is it not because a lot of people were very badly burnt. Mr Nash talked about more than $8 billion of deposits being lost by people whom I consider to be naive investors. Although Ms Dalziel talked about what she believes is the lack of a regulatory framework I am not quite sure I agree with that because there have been very sound regulatory frameworks in place. 
It has to be said that there is a lot of human nature in this equation. I was advised by a financial adviser that the majority of investments in the finance companies that failed were not made through financial advisers but by people clipping the coupons out of newspapers and posting away their cheques. Although we put in place all these frameworks to regulate financial advisers which is a very appropriate response to the situation we find ourselves in I think the lack of financial knowledge and financial literacy in this country is very very low and needs to be improved. So I really strongly support the bill. I look forward to people submitting on it in the Finance and Expenditure Committee. I do think we need to improve our general financial literacy and our risk approach to borrowing and lending so I support the bill.