Smith Damien; Bayly AndrewDAMIEN SMITH (ACT): Thank you Mr Chair. I'd like to keep this question very specific. I'd like to probe the Minister's position further on building societies and credit unions. They are already legislated to act in the best interests of members at all times. They don't have the support of the Reserve Bank from a liquidity and balance sheet point of view and increasingly our research shows that in New Zealand people are going more and more to credit unions and building societies than banks on a percentage basis because the service is great and they actually have the opportunity to get a fair hearing fair products and a fair explanation of what it is they're buying into. So if you look at all the people that have been excluded from this legislation in terms of lenders I find it tough that over the last year I've asked in the House and to Adrian Orr and Grant Robertson and the Minister of Revenue why we can't be more sympathetic to credit unions and building societies and let them perform a service out there that is not burdened by this extra legislation. And I'd like to ask the Minister: why can't they be exempt from this?ANDREW BAYLY (National—Port Waikato): Thank you Mr Chair. I found the Minister's argument very interesting: $1.4 million. I suppose my first question is—and this has been the central thing—banks and financial institutions make mistakes and we don't want them making mistakes. We've already got the Credit Contracts and Consumer Finance Act (CCCFA) legislation; that's already been in place. What this bill does is put another architecture over the top of it and doubles it up—doubles up the requirements on financial institutions to hire lots of people to do lots of compliance. So I suppose my question to the Minister is: what is the benefit-cost ratio of this and how much have the officials estimated these reforms these new compliance regulations will cost financial institutions to implement? I'd love to know whether there's been any assessment of the cost of financial institutions implementing this particularly when they've already had to gear up to meet the CCCFA requirements.As my good colleague Hon Todd McClay said between 6 and 10 percent of loans are not now being processed by the banks that would have otherwise been processed up to 1 December last year before the new CCCFA regulations came into force. It has been a disaster. Talk about cost—that's a real cost particularly for first-time buyers who are wanting to buy a property or people who are really struggling to get credit who want to buy a car or whatever. What that legislation's done is stop banks—probably the lowest cost lenders—and driven those people in to high-cost lenders. It's absolutely been a perverse outcome; and if you talk about financial cost the serious personal cost to those individuals has been severe.So I did ask a question about new section 446M before because I'm trying to understand some of these regulations. They are just unbelievable. Why don't we try another one—why don't we try another one Minister? So I've slipped past paragraph (a) (ab) (ac) (b) (bb)—don't worry we're only a quarter of the way through these new regulations! So the minimum requirements for fair conduct programme requires initial and regular ongoing training for each of those employees agents and intermediaries. I'm hoping that this is going to be dealt with in the Supplementary Order Paper on the following matters.So on the relevant services fair conduct programme—so of course if you change your fair conduct programme presumably you have to pull back all your intermediaries. So if you're a bank selling probably what 100 different products—KiwiSaver insurance different banking products—every time you make a change in your fair conduct programme I presume you have to call them back and retrain them including your intermediaries I think. Checking that each of those employees agents and intermediaries has completed the training—so you've got to do the old tick box. So a bank like ANZ—I wonder how many intermediaries it's got. Have you ever worked it out? It would be interesting.Minister the second question: do you know how many intermediaries a large bank might have? Because presumably you've now got to pull them all back in and ask them somehow whether they've completed that training and have a reasonable understanding of the matters that have been covered by the training. So it's not just a case of turning up and saying Did you attend the training?" You actually have to sit down with Mr Penk Mr Smith whoever and say "Now tell me did you understand it all?" And what happens if Mr Penk's a bit slow? You might have to do retraining. So how does a director know that Mr Penk—an intermediary selling some obscure insurance policy out in the Chatham Islands—actually has understood the new code?And then we've got to do—no I'm just rapidly ripping through here paragraph (bd) "managing or supervising each of those employees agents and intermediaries to ensure that they are supporting the financial institution's compliance with the fair conduct principle and monitoring whether those persons are giving that support"—and gee we've got a whole lot of stuff we can talk about. Well can the Minister please just provide a little bit of clarity."