Foss Craig: Westpac New Zealand Bill — First Reading 
Foss Craig: Westpac New Zealand Bill — First Reading 
[Volume:669;Page:15939] 
CRAIG FOSS (National—Tukituki) 
: 
 I move  
That the Westpac New Zealand Bill be now read a first time. 
 This is a private bill promoted by Westpac New Zealand Ltd. At the appropriate time I intend to move that this bill be referred to the Finance and Expenditure Committee and that the committee report back by 8 April 2011. The bill provides a mechanism to enable certain assets and liabilities of Westpac Banking Corporation in New Zealand being principally assets and liabilities of Westpac Banking Corporation’s New Zealand institutional banking business to be vested in its New Zealand subsidiary Westpac New Zealand Ltd. 
Westpac is one of New Zealand’s oldest financial institutions and has operated in New Zealand since 1861 having both a branch and a separately incorporated subsidiary Westpac New Zealand Ltd. Next year is its 150th anniversary in this country. It provides key sponsorships in the community through the rescue helicopter the Halberg Trust the Sir Peter Blake Trust and Westpac Stadium to name a few. Westpac is one of four banks that have dual banking registration in New Zealand. 
Westpac New Zealand Ltd was incorporated and became a registered bank in 2006 in order to comply with the Reserve Bank of New Zealand’s local incorporation policy. That incorporation policy provides that systemically important banks should be incorporated in New Zealand. A bank is regarded as systemically important if it has liabilities other than those to related parties in excess of $15 billion. Branches of New Zealand - registered banks such as Westpac Banking Corporation’s New Zealand branch have a condition of registration that their external liabilities are not to exceed that amount. 
The Reserve Bank’s local incorporation policy assists the regulator by providing it with greater control over the assets of a bank in the event of a bank failure under New Zealand law. This control can help to prevent a bank failure from spilling over to the wider financial system and developing into a systemic crisis. Having regard to that policy Westpac Banking Corporation and Westpac New Zealand Ltd have agreed with the Reserve Bank that Westpac Banking Corporation will transfer certain assets and liabilities to Westpac New Zealand Ltd being principally assets and liabilities of Westpac Banking Corporation’s New Zealand branch’s institutional banking business. 
The transfer will mean that Westpac New Zealand Ltd will increase in size which is beneficial in terms of the local incorporation policy as it will allow the Reserve Bank to have greater control over the assets that are transferred were there ever to be a failure event. After the transfer Westpac Banking Corporation’s New Zealand branch will retain its financial markets operations. The transfer will reduce the size of the branch and help to ensure that it continues to remain below the threshold going forward. 
Legislation is the only means by which the assets can be vested in Westpac New Zealand Ltd efficiently and economically without disrupting the conduct and continuity of Westpac’s banking business. It is essential for customers staff and other contractual counterparties of Westpac that the vesting is seamless. Legislation is also the only means by which appropriate amendments to other legislation can be made. 
The bill is largely based on the Westpac New Zealand Act 2006. Like that Act the bill facilitates the vesting by providing the overall legal framework for the transfer of the assets and liabilities from Westpac Banking Corporation to Westpac New Zealand Ltd with a subsequent vesting order containing the particulars of the assets and liabilities to vest. Consideration was given to using the Westpac New Zealand Act 2006 but that was not feasible as it was not drafted with the intention of being used for a second vesting. That is why a new Act is necessary. 
The vesting of the assets and liabilities is implemented by an Order in Council by a detailed proposal that must be approved by the Governor-General on the advice of the Minister of Finance given in accordance with a recommendation of the Reserve Bank. The requirements of the proposal to be included in the vesting order are set out in the bill and are based closely on the Westpac New Zealand Act 2006. Given the level of detail required to specify the assets and liabilities being vested and the fact that the assets and liabilities of the business are constantly changing a vesting order is the preferred means of managing this complexity. 
Like the 2006 Act a number of common merger provisions have been included in the bill. The bill also ensures tax neutrality on vesting. As the transfer is being done in order to comply with regulatory requirements it is appropriate that no tax liability arise or tax gain be triggered by the transfer. The Inland Revenue Department has been consulted and is satisfied that the bill achieves the correct tax policy result. The Reserve Bank and Treasury have been consulted and are also satisfied that the bill does not raise any concerns from a financial stability perspective. 
New Zealand has a strong and functional banking system. We have all seen that in the way New Zealand has come through the global financial crisis without the turmoil in the banking sector that has been seen offshore. Having a strong banking system matters. I think that this bill in a small but important way makes the banking system stronger. 
I commend this private bill to the House. At the appropriate time I will move that it be referred to the Finance and Expenditure Committee.