Cosgrove Clayton: Non-bank Deposit Takers Bill — In Committee Third ReadingText is incorporated into the Bound VolumeCosgrove Clayton: Non-bank Deposit Takers Bill — In Committee Third Reading[Sitting date: 19 November 2013. Volume:695;Page:15033. Text is incorporated into the Bound Volume.]Hon CLAYTON COSGROVE (Labour): I want to pick up where David Parker left off in respect of the smaller end of town in terms of credit unions. I note that the New Zealand Association of Credit Unions and its members made a number of submissions on the Non-bank Deposit Takers Bill. Basically their thesis said that credit unions should not be lumped in with finance companies under the same non-bank deposit takers definition given that “A cooperative business model”—I am quoting from them—“is so inherently different from other financial institutions”.That does raise a valid point because if you look at the model of credit unions and friendly societies they have vastly different objectives based on the various Acts—the Friendly Societies and Credit Unions Act and others—that govern them and that they originate from. They are coupled with their own prudential supervisory requirements via trustees. In the case of credit unions they are all equal partners equal shareholders within that entity which is vastly different from the case of the financial sector. They have a cooperative model that is based on equal ownership and that is based on the veryneeds of the individuals in that entity and the communities interests and industries in which they operate. They are inherently conservative if you look at the history of credit unions in respect of their investments. They are involved in health schemes skilling schemes and all sorts of interesting and innovative processes and they are very entrepreneurial but they are inherently conservative and they are based on a cooperative model. Their approach to business is not driven by shareholders if you will who take risks; their basis for business is based on cooperation and collectivism. And it would be hard to see and it is still hard to see why those additional prudential requirements should be visited on them because of course they inherently have a whole series of additional compliance costs.So I would be interested to know from the Minister in the chair the Associate Minister of Finance Jonathan Coleman—and if he could answer some questions that would be helpful to us—why it is that the Government believes that credit unions for instance and friendly societies and others that do indeed take deposits but operate completely differently on a far more conservative basis with a cooperative model and equity in terms of individual members should be lumped in with this. I do not know whether the Minister in the chair is going to take a call. I note that the chair of the Finance and Expenditure Committee Paul Goldsmith is here today. It would be very helpful if the Minister is not in a position to take a call if Mr Goldsmith took a call and gave the Government’s rationale for this. The cost of regulation of course is going to be borne by firms that did not collapse that actually did do the right thing—credit unions and others—that were fiscally conservative and that did manage their funds and their members’ funds and investments appropriately. Of course they are going to be the ones that along with others in the financial sector will bear the brunt of these compliance costs.We are all as I said in the last debate for financial stability. We are all for ensuring that the best prudential requirements are put in place to protect mum and dad investors or any investors. You would have to look—and I challenge the Government to provide some evidence if I am wrong—at the history and performance of credit unions. In many many respects in the management of funds that they have they outstrip many in terms of the conservative nature of their investment portfolios and how they manage funds. That is borne out by many of those they outstrip not being here any more because they collapsed.Those credit unions provide a pretty unique form of model and form of investment for their members. They are involved in a vast array of pretty unique activities for people who are in this sector in terms of providing opportunities for their members and they have a completely different model. It is a cooperative model. It is a very old model. They operate completely differently. So it would be helpful if somebody on that side could for the record put on the record the rationale for lumping in credit unions with every other non-bank deposit taker because I think they do make a valid argument that they can differentiate themselves off from most. If the Government still believes that it is appropriate that they be part of this regime then the Government needs to stand up in all fairness and articulate in a detailed way why it believes that. It may be helpful to do so I think in terms of the level of understanding. And it may—I doubt it but it may—allay some of the fears that credit unions and others in that area have in respect of this bill.I would be grateful if somebody from the other side would take a call. Again there is not a lot of politics if any really in this bill. I was on the Finance and Expenditure Committee for most if not all I think of this piece of legislation going through and I would acknowledge that there was a genuine effort on both sides to make it work. It is appropriate but these credit unions and friendly societies do have some genuineconcerns. They have put some appropriate propositions on the table in their submissions arguing that they should be differentiated off and dealt with differently or dealt with under the Acts that prescribe their activity anyway. I would be grateful if a member from the other side or Mr Goldsmith could provide the Government’s rationale for that. I am sure that that would be helpful for those submitters.The question was put that the amendments set out on Supplementary Order Paper 394 in the name of the Hon Bill English be agreed to.Amendments agreed to.Parts 1 to 4 schedules 1 to 3 and clauses 1 and 2 as amended agreed to.Bill as amended agreed to.Bill reported with amendment.Report adopted.