Wood MichaelMICHAEL WOOD (Labour—Mt Roskill): Mr Assistant Speaker I rise to speak firmly in support of the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. I'd like to just start off by saying that at the select committee along with the sponsor of the bill Mr Stuart Smith and other committee members this has been an incredibly satisfying bill to work upon. I think it's been satisfying because we've got to a good outcome on it but it wasn't actually all that easy—it wasn't easy at all.The passage of this bill goes back a long way actually. It was originally part of a broader set of reforms I think as part of a Government bill back in about 2014. In response to a range of concerns and a difference of opinions in the credit union community it was effectively removed from that bill at that time. Members from the credit union movement who wanted to see progress on these issues then linked up and worked with Mr Smith to bring the bill to the House as a member's bill.When it came to the House and when it came to select committee as a member's bill none of those issues and none of those points of contention in the credit union community went away so our job as a select committee was to work through those issues and try and get a good piece of legislation that's fit for purpose for the sector and that will be enduring. You can never tell the future but my hope and expectation is that we have reached that outcome. I want to especially acknowledge Stuart Smith for his work in stewarding the bill through.I want to acknowledge other members of the select committee; it has been a very good example of the Finance and Expenditure Committee working I think very constructively and intelligently to take a bill to treat submitters with respect to take their concerns on board and to emerge with a better and more enduring bill. From the Labour side of the committee I particularly acknowledge Dr Duncan Webb. During the committee process after the submissions were heard Dr Webb and Mr Smith basically went off to the side and put their heads together around some of the tricky issues—particularly mutuality which I'll come to later—and arrived at some solutions to guide our way forward on the legislation.I would also like to acknowledge the submitters in this process. We had submissions—I think it must have been from pretty much every credit union and friendly society in New Zealand and some from overseas in fact. It attracted a great deal of attention. The folks in the credit union community are a movement. They have a deep history and the people who are involved in credit unions have a deep sense of mission and a belief in what they are doing. They are different from other financial institutions. Their members own them. They are very wedded to this principle of mutuality; that is that their purpose is to serve their member owners end of story. And there is a great deal of unwillingness to see that watered down in any way whatsoever. Then there's the principle of common bond: that the people who are in the credit union actually have something that kind of holds them together.If you look historically at the way that credit unions came together there were officially two types. One were industrial credit unions and we still have some of those. We have a New Zealand Firefighters Credit Union a Police and Families Credit Union and a credit union called Steelsands Credit Union which was originally a credit union for workers who worked with steel sands in the steel industry.Andrew Bayly: Still do.MICHAEL WOOD: Still do. That's right. That's why we still have it. They submitted to us. Then we have credit unions that are based on a geographic basis. So we have credit unions like NZCU Baywide NZCU Central—the clue's kind of in the title. So that's the principle of the common bond. It's not just sort of anyone floats in there. There's something that brings people together and the people who lead the sector feel really strongly about that principle and their point of difference within the financial services sector. So that was part of our challenge: how to meet the challenges of the future make sure that we had modern fit for purpose legislation that allows credit unions to thrive and prosper and grow where necessary but also preserve those really important parts of the DNA of the credit union movement.If I can say I think this is really important because one of the things that we want to ensure that New Zealanders have access to is a financial services sector that is diverse. Some of us do feel a little uncomfortable about the relative lack of diversity in our financial services sector. We have four really big players in the big banks who in many ways do a good job of what they do but they're pretty market dominant and it's always been my view that a healthy financial services sector provides a range of options for people at different levels.I just want to pick up on one of the comments made by the previous speaker the Hon Jacqui Dean who made the point that credit unions sometimes in 2018 are filling gaps in New Zealand society where the bigger players have withdrawn. I can think of regional and rural communities where the big banks have withdrawn and I can think of lower - socio-economic communities in our bigger cities and I actually think we need to keep holding the big banks to account for that. I think they need to show a bit more of a social conscience and a bit more of a commitment to New Zealand in that respect.But in the meantime credit unions are often one of the institutions who keep providing a service for those people. One of the submissions that I'll come to a little bit later in my comments is from Aotearoa Credit Union who are a credit union very proudly based in Auckland. They say Our mission is to serve—not exclusively but to a large extent—some of the lower - socio-economic communities in Auckland." So they have access to good trustworthy financial services that aren't going to rip them off and are going to help them with their savings and in getting on with their lives.Previous speakers have gone through the key objectives of the bill. I'll just touch on those briefly and then I want to talk to some of the changes that the Finance and Expenditure Committee has made in its considerations. The first point is that the bill allows for credit unions and associations of credit unions to incorporate. That removes in the first instance the need for credit unions to have what we call internal trustees. They currently have quite a complex unique structure. We heard stories during the submissions process whereby credit unions who are wanting to lend to someone had to sort of go through this weird very antiquated process of bringing around and getting people to sign a bit of paper—and Jack was away on holiday and that made it difficult; so quite an antiquated structure. What we're moving to is something that is far more mainstream in terms of a standard incorporation structure. Ensuring that the credit unions' board is responsible for all aspects of strategy governance and oversight—so basically making sure that we have really good solid governance structures within credit unions and protecting the interests of third parties that deal with credit unions in good faith.The second key change is—and this is really important and a number of submitters really did stress this—permitting credit unions to make loans direct to enterprises related to members. So at the moment credit unions can only lend to those individuals who are their members and quite often there was kind of a Mickey Mouse sort of walk around whereby OK that member might want to get a small business off the ground and wants a bit of money to set up—I don't know—a small lawnmowing business or something but the credit union is constrained from actually lending for that business interest. So you sort of have to have this funny arrangement whereby the credit union would lend to the individual and then it would be passed on and that created all sorts of issues and lack of transparency. We had a number of credit unions saying to us that they would just lose business out of that. They would have credit union members who would either go to a third party to get that financing for their small business and therefore have two different financial service sector relationships or because that's too complicated they'd just take all of their business elsewhere and get the business lending from the other organisation.I think this is really important. It's not about credit unions going crazy and lending all over the place—and in the select committee process we've refined this a bit so the lending really is only to small to medium sized enterprises (SMEs)—so it'll be to SMEs that the member has to have at least a 25 percent equity stake in and it'll be to SMEs that employ less than 20 people as well and we've made sure that those provisions are in there really clearly so that we're targeting this at the SME sector. We don't want the sector to run away and get into risky situations where it's lending money all over the shop.The final point in the original bill is that it provides for associations or credit unions to be incorporated and makes it clear that associations may provide services to non-member entities that are mutual entities or cooperatives if authorised by the association's rules. This is really important because most of these credit unions are pretty small and they actually rely on services provided by the association to be able to do their business. Increasingly for those association services to be viable they're going to need to get a big bigger—they're going to need to provide services to other entities. And there's been a lack of clarity around that so we're making sure that within this bill that is allowable.In the time I have remaining I want to come back to this key point around mutuality. This was the big fear from a number of submitters. We'll put that on the record. It wasn't just one or two submitters who were concerned about this issue of mutuality; it was a number of sizable credit unions. I think there was a genuine fear of change in the sector and a fear that something important would be lost. At select committee we considered the option—I think it was raised by David Seymour—about whether we might have a two-tier structure where some credit unions could opt into effectively the new legislative provisions and some could remain as they are. We were convinced that in the end that would be overly complicated within the sector and create all sorts of confusion but what we decided to do was to have a "belts and braces" approach really putting in the legislation very very clear requirements that mutuality would be required. I'll just read out the legislation very clearly here—the new legislation in clause 15 new section 101(1AA): "A credit union is to operate on the basis of this Act for the mutual benefit and assistance of its members." That is there in black and white in the legislation and that's a party message I'd like to leave to ensure that those credit union associations who perhaps weren't so sure about this legislation can be ensured that their proud history of mutuality is going to continue in this new legislation. Thank you Mr Assistant Speaker."