Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): As the new chair of the Finance and Expenditure Committee I would like to commend the former chair of the Finance and Expenditure Committee Mr Michael Wood for the way that he shepherded this particular bill through the committee. It is a very very technical bill. It is actually hard to understand the detail of the amendments and also the financial instruments that the bill deals with. They're complicated and it takes a bit of time and effort to get to grips with them. Mr Wood ensured that we got that time—that we did spend time with the officials—to really get to grips with the bill.As the previous speaker Brett Hudson has done I would also like to recognise Mr Andrew Bayly for his contributions to this bill. He was like a terrier going after each little wrinkle in the bill.Hon Member: A loud terrier.Dr DEBORAH RUSSELL: A loud terrier but very effective. It was one of those bills where the committee did work together to get the bill right so a genuine piece of cross-party legislation here which is wonderful to see. I also commend the other members of the committee for the work we put in. But I am going to take issue with one thing that the immediately previous speaker said when he said that this bill was as arid as the Sahara." Does he have no imagination? This bill is actually critically important. Perhaps it is full of dry detail but the intent of the bill is very important and to call it dry is to I guess isolate New Zealand from the reality of the international financial markets that we need to deal in.So I just want to perhaps explain a little of what the bill is about for people who are listening tonight before I move to some of the submissions on the bill. It deals with two particular issues that arose really in the wake of the 2008 global financial crisis. One is to do with the very complex financial instruments that were being traded and re-traded and re - re-traded and cycling around the world in a frenzy of activity in the years before the financial crisis. These were very complex instruments—instruments like futures and swaps. Now most people don't understand what a swap is. The idea with a swap is that there are two parties: party A and party B. Party A perhaps has a fluctuating interest rate and party A wants to stabilise that interest rate. So party A swaps their chain of interest payments with party B who offers them a stable interest rate. That's why it's called a swap. Party B takes on the risk of the fluctuation. Party A might pay a little more in interest but they stabilise the interest cost so they're much more predictable. That's a swap—the essence of a swap. Each party swaps their future chain of interest payments. They are hard to grasp hard to describe in just words and hard to value.During the global financial crisis instruments even more complicated than those were being dealt around the world into a real pile of transactions. They were in theory based on solid quality lending—the lending on mortgages—but even that was dubious as an individual mortgage on a house perhaps issued by a bank was then sold on to another lender and to another lender. Perhaps a mortgage or at least the income flows from it might be sliced up and spread across several lenders packaged into deals and then onsold and then derivatives built on top of that. The transactions that were in progress were so complex that even those who were trading them—even the incredibly smart people financiers the people who specialise in finance and valuations—possibly didn't even quite understand what was going on. Following the global financial crisis the world said we need to do better with regulating our financial markets. Part of the regulation that has been put in place is that each party to one of these deals has to be able to secure the flows of income from it—has to provide some collateral to make sure that if the deal falls over not all is lost. Those are the types of rules that are now being brought in by the G20. If we as a nation wish to participate in those global financial markets we too have to meet the standard set by the G20 in terms of financial institutions and how we deal in those markets. That is part of what this deal does. It sets the rules for how we do margins on derivatives and it brings us in line with those major traders on the world scene. That's part of what the bill does.Another part of what it does is look at the benchmark rates that are used for valuing some transactions in the wake of the LIBOR scandal. Now LIBOR stands for the London Inter-bank Offered Rate and as it turns out there was well shall we call it "very sharp practice"—so sharp that a lot of people got cut by it—that was going on around how that rate was set. Again eventually rules have been put in place to determine how those rates are set and this legislation brings us into alignment with those rules.It was a very technical piece of legislation and we did receive a number of submissions on it. I wish to read out the entirety of one submission. I won't identify the person who wrote it because the submission has two words. It says "Banking industry" and that's it. What it points to though is the concern that ordinary people feel with respect to what has gone on with banking worldwide and what has gone on with these financial markets—that ordinary people do feel that something beyond their control is happening and it destabilises their world. Of course many people have many concerns with the banking industry. This person chose this particular bill to put in a submission on it and it did have just those two words but it does speak to a real concern that people have. But the other submissions came from entities from law firms like Buddle Findlay and Bell Gully and Chapman Tripp who raised some concerns around how securities were discussed in the bill. They broadly supported the bill but they wanted some changes to it. Another submission came from the New Zealand Bankers' Association again dealing with some of the very very technical aspects of the bill. The Restructuring Insolvency & Turnaround Association of New Zealand put in a submission as did the New Zealand Financial Markets Association and the ISDA the International Swaps and Derivatives Association. Some very highly accomplished and very highly educated people spent time and effort getting to grips with this bill and then coming and talking to the select committee about it to make sure that we understood as we best could exactly what was going on with the bill and how it needed to be changed in order to meet its policy objectives. So we thank those people for putting their time and effort into this bill.Before I conclude the speech there is one other group of people that I wish to thank for their time and effort on this bill and it is the expert officials who were advising us. They were—I hope they don't take this as an insult because I mean it in the best possible way—wonks or nerds people who really understood their material really got to grips with it. I think they were quite pleased to spend some time discussing it with us because often this sort of material is not widely discussed. As some of you may know I used to work for IRD and when I said I worked for IRD I knew about tax it was an absolute—well it certainly killed the social conversations. I suspect that the officials who worked on this bill when they say they work on financial derivatives and financial markets people go "OK." and move straight on. It was a real pleasure to listen to their expertise and I thank them for their guidance as we worked our way through this bill. I commend this bill to the House."