Watts Simon; Robertson GrantSIMON WATTS (National—North Shore): Thanks very much Mr Chair. The questions that I have are in regards to clause 61 in Part 3. As my colleague Andrew Bayly was asking a large portion of the select committee process in regards to those smaller entities were in relation to the concerns raised where a very small number of people within those entities fulfil regulatory roles in comparison to the big four banks and therefore the capacity within those entities in order to meet the compliance obligations under the bill were seen to be at a higher level of burden than those that could be absorbed by having bigger teams and bigger capability in the major banks. My question in regards to the Minister is in clause 61(2)(d) and (e). The conversation at the time at which the bill was going through was actually the same time in which the Silicon bank collapse was occurring in the US—and the fact that the rating agencies in the hours and days preceding the collapse of the bank had said that there was no issue with that bank. The committee also spent some time and asked officials around the considerations of what was seen in the UK around 2007 2008 and 2009 in regard to banking collapses and again where Standard & Poor's and Moody's in particular both provided strong opinions in terms of the credibility of banks which subsequently suffered significant financial collapse. And when one is in this legislation looking at the consistency and comparability of these rating agencies of which there isn't particular competition in the market—and in the context of the fact that our major rating agencies that operate within this jurisdiction and in the global environment—from some perspectives one would say Well you know you haven't done a very good job in regards to providing assessments in regards to financial institutions which have subsequently collapsed and led to significant financial loss for consumers." Then in reality what is the point of having these type of clauses in place?Because you know going back to my question that I asked right in the first part around the circumstances in which this type of legislation would actually crystallise is those that are pretty rare—so I'm interested in the Minister's view around that whether he has any concerns around that acknowledging that there are major players whether there is consideration around other options that could achieve a similar outcome or whether basically the Minister is comfortable to say "Well we're going to look at the adequacy of these rating agencies but we're just going to sort of ignore the fact that they've missed some pretty significant aspects in regards to organisations which subsequently collapsed. And you know that's just the nature of the business." Hon GRANT ROBERTSON (Minister of Finance): With respect to Mr Watts' intervention just now I'll certainly pass his concerns on to Standard & Poor's and make sure they're aware of that. Look obviously there are a lot of circumstances that sat behind the issues that the US system had at the beginning of the year. I'm not sure the role of the ratings agencies was quite the biggest of those but the whole point of the clause that the member is pointing out is to make sure that we have quality ratings agencies active in New Zealand. So that's the point of it. If we didn't have the clause and we could appoint ourselves as a rating agency or something like that I think we'd have much worse—Andrew Bayly: "Simon Watts and Associates"!Hon GRANT ROBERTSON: Exactly. I'm not sure I'd go there Mr Bayly to that particular ratings agency but I don't think that's quite what we would want in New Zealand. And so the clause is in fact designed to do exactly the thing that Mr Watts has raised. I just wanted to come back to Damien Smith's question that he asked—Mr Smith the question that you asked around the different geographies. The officials have pointed out to me that that's particularly in a case such as where there are different loan-to-value ratios (LVR) in different areas of New Zealand for example. So you could have Auckland with a different LVR than another part of the country if the Reserve Bank was choosing to focus on a particular area. So that's an example of how a different lending standard could be applied to."