Bayly AndrewANDREW BAYLY (National—Port Waikato): Thank you Madam Speaker. It's with some regret that I'm standing up to talk on this bill in the second reading because I think if we think about the Reserve Bank it is probably our pre-eminent institution in New Zealand. The previous speakers have talked about the importance of making a reference to Crown entities. I don't accept that in terms of the Reserve Bank. The Reserve Bank holds a very important fundamental part of our financial system and I don't think trying to correlate and set up institutional arrangements that suit Crown entities is necessarily the right approach. We have a number of issues with this bill—which is unfortunate—because as my learned colleague the Hon Michael Woodhouse said in his speech on this bill when this institution was set up with the current arrangements 30 years ago there were some very important tenets that underpinned the structure that was in place. First and foremost amongst those was the need for independence and excellence around its operations. This bill is making a substantial change to that. The second thing was how it was going to conduct itself and its objectives and again this bill is making substantial changes to that. I think people forget that when we set up the institutional arrangements for the Reserve Bank 30 years ago it was quite revolutionary. In fact many countries around the world looked at New Zealand and subsequently adopted very similar structural arrangements for their own central banking systems. So here we are: we're at a situation where this is the second of a substantial refit of the Reserve Bank. We passed the legislation that dealt with the establishment of the monetary policy committee—which in itself had some changes—and this is now starting to strike its quite significant structural issues with the Reserve Bank.The first thing I'd say to you is the importance when you're dealing with New Zealand's pre-eminent organisation—I think it's absolutely vital—that we should have striven for more agreement around the key reforms that we're talking about. The last thing we want to see happen is that when there is a change of Government there is further tweaking to the Reserve Bank. That is not good for New Zealand. That's why we were very keen to work in a collaborative manner to try and strike that balance. We weren't able to do that but I do acknowledge that in this bill there are many good aspects so I don't want anyone to think that we oppose the bill—large parts of it. We think that what it's seeking to achieve is very good but there are five crucial elements. The first one is the issue around the structure and I sort of alluded to that. What has been put in place is an executive board structure that is now having full responsibility for managing both prudential policy—the policies that apply to banks in effect—and the insurance industry and the non-bank deposit takers. That means that we've moved from the model of one person who's a specialist to now one of a joint board structure. It's not only like a normal independent board structure full of non-executives; this is now an executive board. The big issue I've got is first of all in formulating that board those members need to be of the absolute highest quality and calibre and expertise in the business of prudential and insurance management. I'm not sure that that depth of pool of people available actually is available in New Zealand and there will be difficulty in trying to find the right people. This is a situation where we need very specialist skills managing and overseeing those very important functions. The role of the governor has been moved more to a CEO-type role; albeit that he or she will sit on the board. But that is a different structure and I think it's a fundamental change that people should be aware of. The second thing that we have concerns with is this removal of the words around seeking to have an efficient financial market. I was not persuaded by Treasury's representations as to why we should remove the word efficiency". As a party we believe that it's essential that not only do we maintain financial stability—which is the underlying premise of the Reserve Bank—but it should do so in a way that is efficient for the market. That word has been deleted and I think it's a fundamental word and actually one that many submitters actually disagreed with seeing removed from the core objective of the Reserve Bank.The other aspect we have concerns with is the issue around remit setting for the Reserve Bank. We think it's important that the Minister of Finance—whoever he or she might be in the future—has the possibility of making changes though hopefully on very rare occasions. It's only happened once and the Minister used section 68B recently with regard to housing policy—and I think in my personal view used it ill advisedly. The issue with it is that we believe that if there is a situation where it is used—and it should be by exception rather than the rule—then that should be subject to some parliamentary oversight. That doesn't mean that the powers of the Minister of Finance should be fettered but any changes should be subject to parliamentary oversight.It also relates to the issue of functions and some of the members have talked about it tonight. The way we've ended up in the bill is that a change to the bank's function can only occur if it's requested by the bank. So if there's a disagreement and the Minister of Finance wants to make the bank focus on issues that he or she considers are very important there is no ability to impose that on the Reserve Bank. Those functions can only be amended through agreement with and recommendation by the Reserve Bank. We again don't think that's appropriate. Again this is something by exception and the case in point that I've been pushing—and I've pushed the Reserve Bank on this issue on a number of occasions—is the issue of cryptocurrency. We've now got embedded in this piece of primary legislation the specific function of the Reserve Bank to monitor cryptocurrency which is sort of a second rating issue. I think personally it should be a much stronger power that's imposed on the bank. But if there was a situation where the Reserve Bank chose not to do that—and there has been some reluctance by the bank to take a more active role in cryptocurrency at the moment; that may change over time—then the Minister of Finance has no ability to require that. Again we think the right should be held both by the Reserve Bank who may request a change or by the Minister of Finance but the trade-off for that again should be the ability and the requirement that those issues are reported back to the House and debated. It doesn't again restrict or fetter the right of the Minister or the Reserve Bank to change the powers or functions but it does at least give Parliament clarity and transparency around some of those changes.The other issue that we're concerned about relates to the issue of the Crown's liabilities. Currently the bank has the power to do quantitative easing and can purchase up to $100 billion of Government stock and at the same time it has a $28 billion funding-for-lending programme. We think that if you're trying to design a piece of legislation for the next 30 years—which hopefully we don't have to seek further amendments to—then we should be forward leaning and should be anticipating what might go in the future. The way that the Minister of Finance has control over the obligations that the Reserve Bank might enter into and that actually go on to the Crown balance sheet loosely—if I can use the word "simplistic"—we propose similar arrangements that were put in place for the Bank of England by the British Government. There are many more ways that could be done more transparently and it's unfortunately one of the other issues that we feel we cannot support."