SpeechPAULO GARCIA (National): Tēnā koe Madam Speaker. Tēnā koutou katoa. I thank the member across the House for a very clear and simple rendition of all this. I myself who was not a part of the Finance and Expenditure Committee will strive to speak to the bill in broad strokes as best as I can. So I speak to the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill.New Zealand banks use offshore and domestic finance to fund their activities. They enter into derivatives contracts to hedge on the exchange risk of raising money in foreign entities. Other large public sector managers—ACC the New Zealand super fund—also use derivatives for hedging purposes. Large non-financial corporates also use derivatives. The current value of the big four of New Zealand banks' derivatives activity would be impacted if this bill were not passed. Currently it's around $8.7 trillion annually and with the outstanding notional amount of cross-country currency basis swaps contracted against international counterparts it's around $90 billion across the big four banks. This omnibus bill seeks to amend several Acts to achieve mainly two primary purposes two objectives: to ensure that New Zealand financial market participants can continue to participate in international financial markets particularly by using derivatives to hedge their risks; and also to bring New Zealand law in line with financial market reforms in the European Union and G20 States. The National side supports the bill and we support all reforming legislation so that banks are not impeded in any way from complying with international requirements in relation to over-the-counter derivatives. These reforms are needed to ensure the ongoing soundness and efficiency of our banking system. Our banks need access to capital and our regulations shouldn't prevent them from complying with international best practice and this is what the bill allows them to do. We also support the need for a licensing regime as it is the only way to ensure continued access for New Zealand benchmark users to European financial markets. The G20 rules require that parties to over-the-counter uncleared bilateral derivatives provide security also known as margin" under a derivative contract to support the contract. If one party fails to honour its obligation under the contract the other party can call on the margin to shield it from any losses that may result. The G20 reforms were introduced as a way of reducing systemic risk in international derivatives markets that contributed to the global financial crisis as many have already mentioned. There are certain features of New Zealand's insolvency statutory management and personal property security laws that may impede banks' ability to comply with the margin requirements. In particular these laws restrict the ability of entities to post margin that the other party through the derivative contract can call upon immediately in the event of a default by the posting party. Inability to comply with margin requirements may restrict affected New Zealand entities' access to overseas derivatives markets and their ability to hedge the exchange risk of underlying funding. For this reason we find that the bill greatly supports this continued access by New Zealand banks and we commend this bill to the House."