Williams Andrew: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — Second Reading 
Text is incorporated into the Bound Volume 
Williams Andrew: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — Second Reading 
[Sitting date: 21 February 2013. Volume:687;Page:8139. Text is incorporated into the Bound Volume.] 
ANDREW WILLIAMS (NZ First) 
: 
 I take a call to continue the debate on the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill. As we have heard in the previous reading this is all about providing a bonded system through our banking system to ensure that there is some certainty for international investment in New Zealand through our banking scheme. Covered bonds have been used by our banks for several years. This bill formalises the arrangements. The BNZ I think was the first New Zealand bank to start issuing them but without the formalities of Parliament that is required to confirm the arrangements internationally. 
We have a few reservations about this which we would like discussed at Committee level—the first being that they are talking 10 percent here in terms of the bond percentage to the banks. Australia has 8 percent and other countries have less. I think Canada’s is as low as 4 or 5 percent. It is questionable whether New Zealand should go as high as 10 percent for covered bonds when our partners across the Tasman are on 8 percent. We will question through the Committee stage whether New Zealand should be more in line with Australia rather than at the higher level and what impact that would have on our banking system by being at the slightly higher level. We are always trying to be on a level playing field with Australia and it would seem to be more sensible that we were the same. 
Although these covered bonds are necessary in a way to provide an element of certainty to our financial institutions and for people investing in our international institutions it also means that of course these covered bonds have a higher ranking in terms of their status over other investors in the bank. We have already had a case of something like 61 financial institutions in this country going belly up in the last few years. It would be somewhat concerning if we were at a level of deposits up to 10 percent that had international first preference over our banks and should heaven forbid there be a problem with one of our major banks in this country and they had first call on the funds ahead of good hard-working New Zealand local investors. In that respect that is another reason perhaps to reconsider the 10 percent level because we certainly do not want a situation where New Zealand investors are second cab on the rank behind international investors who would dearly love probably to have that extra security here in this country and at the same time come and take advantage of what interest rates are being offered compared with the virtually zero interest rates in parts of Asia the United States and elsewhere. 
Covered bonds have been around for several hundred years. I think they were first introduced in Sweden in the 17th century or thereabouts. They have been used extensively by various European banks over several hundred years. They are an international mechanism to provide a better security base; a basis for the banking system. We are very fortunate that the Australian and New Zealand banks are held in high regard internationally. Through the whole global financial crisis certainly the Australasian banks have weathered the storm extremely well compared with many of their counterparts in Europe the United States and elsewhere. In that regard therefore we are even more attractive perhaps for international investment as a result. However having said that we certainly want to ensure that New Zealand comes out of this on the right side of the ledger and that we are not just seen as an easy target to put money into for better security than other places in the world that perhaps do not have the same level of confidence in their particular banking systems. We are very fortunate that we are living in a good stable democracy where the value of the banking system is highly valued. In this regard this does provide added weight to that banking system. 
New Zealand First is always looking for mechanisms by which the banking system is controlled in a better way. We believe it was very remiss that we had 61 institutions in this country going belly up. We believe that an instance such as the South Canterbury Finance situation where $1.6 billion had to be written off by this Government and taken up by this Government paid for by New Zealand taxpayers was incorrect. It was particularly disappointing that in the last 6 months of that bank so many more additional funds were invested there because of the Crown Retail Deposit Guarantee Scheme that the Government offered and that that oversight was allowed to continue for 6 months unfettered and unrestrained by the Reserve Bank or Treasury and not properly monitored by the Minister of Finance to ensure that banks such as the South Canterbury Finance bank did not go belly up. 
In that regard we have got something to learn from some of the errors in our banking system. But in this regard this is good legislation that provides another element of certainty to our banking structure. It will encourage sound investment in this country. It does start to question the need for the sale of State assets when we have been told by the Government that that is a way of securing more investment in this country through the sale of State assets. New Zealand First does not believe that is the case. We believe there are many other mechanisms to encourage investment in this country including supporting our manufacturing and our drive to encourage the growth of our economy not from the sale of assets. New Zealand First will be supporting this bill and we commend it to the House.