Dalziel Lianne: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Dalziel Lianne: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6095] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I have been looking at the questions and answers that Treasury has released on the Crown Retail Deposit Guarantee Scheme Bill and the concern I have is that they do not resolve one of the question marks I have over the whole thing. We have been talking about how urgent this legislation is and how it must be dealt with under urgency. We are told on the Treasury website that there needs to be certainty so that people can act with certainty as soon as possible: “We want to give depositors and institutions certainty as soon as possible. Approvals for institutions to participate in the extended scheme are expected to begin from late September to early October this year.” So obviously this legislation is passed now and by the end of the month or early next month we are into applications for approvals being lodged by institutions who want to participate in the extended scheme. The advice then states that details of institutions participating in the extended Crown retail deposit guarantee scheme will be published on the Treasury website. Essentially this is an answer to a question that a depositor or investor might be asking such as: “Where do I find out if my deposits and investments are guaranteed now? How and when will I know if the Crown guarantee still covers my deposits after the scheme is extended?”. 
One would imagine that we are rushing under urgency because there will be a relatively short period of time when applications for the extensions will be made so that everyone can know whether their particular institution will be in the scheme. In fact Amy Adams told the Committee that we had to deal with the bill under urgency because we were so stupid on this side of the Chamber that we did not realise that people made decisions a year in advance. But guess when applications for extensions close? If an institution does not have a credit rating yet when is the latest that it can apply for the extended scheme? When do members think that might be? 
Paul Quinn 
: Who are you looking at? 
Hon LIANNE DALZIEL 
: I am running a little thing over here. Applications for extension to the scheme should be made by 12 October 2010! So the legislation does not have to be passed immediately at all. In fact there is not the certainty for people who are currently— 
Aaron Gilmore 
: Read the rules for the non-banking sector. 
Hon Darren Hughes 
: The member wrote them! 
Hon LIANNE DALZIEL 
: I think that he actually invented the finance sector. We never had a single finance company in this country until Aaron Gilmore thought of it! It is unbelievable. What that man has not contributed to his nation is not worth speaking about but there we go. 
The point I make is that it is all very well for the Government to say that this bill has to be introduced and passed urgently so that there is certainty but in actual fact the real sector that wants this is not the banks—the banks do not want it all—it is the finance companies and the people who are making decisions as to whether they are going to reinvest in finance companies. They want to know when that will be and that is what the wind-down as the Government has described it is all about. But they do not have to decide whether they are going into this until 12 October 2010. 
Members opposite have said that the pricing of risk around the cost of entering this extension has been more appropriately aligned by the reference to the BB rating. I think that the members who have made those comments do not know how the current system is priced. There are two price ranges one leading up to the BB rating and one for those who have improved to the BB rating and beyond. So to tie it back to the BB rating—and I agree with the Government that it is the bare minimum in respect of extending the deposit guarantee scheme—with the introduction of the requirements to have credit ratings under the new non-bank deposit taking legislation makes good sense. But I think members opposite are assuming that there was nothing in the previous scheme that tried to encourage these non-bank deposit taking entities to move to a credit-rating situation before they were legally required to do so in order to be registered under the Reserve Bank legislation. 
I think that the Minister should respond to these questions but if nobody else wants to have a chat about this I will continue. It is a serious issue that I would like the Minister to respond to because everything hangs on the fact that we are not having any element of select committee input. Even the officials briefing for 1 to 2 days that Treasury recommended should happen is not happening and the reason we were given was that this all had to be done so urgently. We have just shown that the one sector that is relying on this measure more than any other sector does not have to have its application in until 12 October 2010. 
The second thing I wanted to focus on again comes from the regulatory impact statement. I have to say that finding out that the regulatory impact statement was not in the bill and having to go and download it over the tea break was not helpful. There is an issue in relation to the changes that the Government will make to the conditions around the guarantee and the Minister may like to take the opportunity to address this. I have read the changes that Treasury is now recommending through the regulatory impact statement and I assume that they have been signed off by Cabinet but it is difficult to tell. Paragraph 63 of the regulatory impact statement talks about “More active management levers:” and “Redefining trigger events for default so institutions entering statutory management would not necessarily be in default.” and I think that is an interesting expansion of the scheme. It also refers to the “Change of control authorisation requirement;” and that is essentially looking at the risk of a buyer entering the market with the aim of using the guarantee to rapidly build a deposit book and perhaps not meeting other conditions that the Reserve Bank or Treasury would want to impose. I think that those three matters are serious issues and they are worthy of debate and consideration. We have seen them included in the regulatory impact statement and it is assumed that they will represent or already represent Government policy although one can never be sure. They were certainly not mentioned in the questions and answers that I referred to. 
But the questions that were raised by the unions and by the economic thinktank that are referred to in annex 3 about the other conditions around employment protection and mortgage holiday provisions simply have not been included in the regulatory impact statement other than to say: “We have assessed the idea of introducing conditions on the guarantee but consider such conditions may undermine the objectives of the guarantee e.g. it may stop firms downsizing when that sort of change is necessary to ensure their future viability.” Again it is very much targeted to the finance company sector not to the banks yet I am sure that it is the banks or the banking unions that are looking for some security for their banking officers who are facing contracting out to overseas placements. I think that the Minister ought to respond to this. Because we have not had the opportunity to debate these issues with officials during a select committee process we missed the opportunity to ask ourselves whether it would be worthwhile from a public perspective to say that while we are giving this protection to investors we will also give this protection to those who have borrowed. 
The mortgage holiday provisions are clearly designed—from the promotion of those who brought them to the attention of the officials—to help people through a difficult situation in a difficult economic climate. I think that the public would find a lot of this kind of proposal much more satisfactory if they could see that there was a benefit that went beyond what they were prepared to meet the cost of or meet the risk of whereas the mortgage holiday provisions really do not represent a significant risk to the banks and would be a huge sign of goodwill at a difficult time especially with so many people facing redundancy. These redundancies are affecting families that have never experienced redundancy in their lifetime. Because these issues have been raised in the regulatory impact statement which was not tabled in the House but in fact hidden on the Treasury website I think it would be worthwhile to have some dialogue around these issues because they are conditions whereby I think it would be a ripe opportunity for a bit of a win-win. The public would see some broader benefit being brought to bear and at the same time it would provide for confidence between our two markets. I would like the Minister to respond to the fact that in the regulatory impact statement the banks say that they see no risk—