Dalziel Lianne: Reserve Bank of New Zealand Amendment Bill (No 3) — First Reading 
Dalziel Lianne: Reserve Bank of New Zealand Amendment Bill (No 3) — First Reading 
[Volume:644;Page:13834] 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I am very pleased to speak in support of the first reading of the Reserve Bank of New Zealand Amendment Bill (No 3). This is the first bill to make it to the House arising from the review of financial products and providers. This extensive project which has encompassed a task force and nine discussion documents has followed what I would describe as a quality regulatory design process engaging fully with important stakeholders from framing the problem definition to designing the policy response and that is a good process. 
As the Minister who inherited the process I cannot take any credit for where we are now. In fact I would like to remind the House that this review of the financial sector began under the very able leadership of the Hon Paul Swain who not only gave teeth to the Takeovers Panel but also gave it something to chew on as well in the form of a Takeovers Code. Then we had the securities markets regime providing for registered exchanges and the introduction of a co-regulatory regime that sees NZX and the Securities Commission undertaking their respective roles in a way that gives confidence to our capital markets both domestically and internationally. Then we had the changes designed to enhance investor protection improved disclosure provisions for investment advisers and stricter rules on insider trading and market manipulation. These take effect at the end of February next year. 
Then we had the review of financial products and providers. This had its genesis in two pieces of work. As a new Minister of Commerce in 2002 I raised the alert concerning the first work which led to the review of financial intermediaries; and the second directed by Dr Michael Cullen in 2005 was on the regulation and performance of New Zealand’s financial institutions which led to the review of financial products and providers. 
This bill derives from the second of these and from the work that the Minister of Finance directed. When this resulted in nine discussion documents all being released to the market at the same time I thought the market would balk at the amount of work that this required but to give the market credit where credit is due it came to the party. Not only did the major stakeholders provide support in their development of the discussion documents themselves but also they provided detailed submissions enhancing the quality of the decision-making process. I pay tribute to all the industry groups from banks to credit unions from financial advisers to insurance brokers and from finance companies to building societies. Out of their contribution we distilled some important principles that we see in the bill tonight. 
Confidence lies at the heart of everything we are doing to enhance the regulatory framework for our non-bank deposit taking sector. This is the first of the bills applying to that sector and it sets up the framework for registration and prudential supervision to be undertaken by the Reserve Bank. Non-bank deposit takers will continue to be subject to the securities regime and trustees will continue to be front-line supervisors in that regard. A bill to be introduced next year will enhance that supervisory regime. 
Dr Cullen has already outlined to the House the key provisions of the bill. All I want to say is that the Government’s decisions did not arise from the finance company collapses. However the need for this legislation is highlighted by them. People could be forgiven for thinking there is no existing regulatory framework to protect the interests of investors in finance companies if all the information they are relying on came from the media. It is very important to recognise that it is the existing framework that we are strengthening. We are not starting from scratch. 
The approach the Government has followed has been welcomed by the broad range of sectors that make up our financial sector. I am sure that the bill will attract submissions from those who may dispute the cost-benefit analysis of certain aspects of the prudential requirements imposed by the bank on a wide range of financial institutions ranging from finance companies to building societies and credit unions. Ministers considered these issues very carefully and felt that the balance fell on the side of exemptions being allowed only to the very small deposit takers from the credit rating provisions. I am sure that the select committee will listen very carefully to all of the submissions in that regard. 
Finally for those who say “Bring in these provisions now. Make credit ratings compulsory right now.” I just make the point that there is absolutely nothing stopping any finance company from getting a credit rating should it choose to do so. If investors want that level of assurance from their finance companies then they should demand that they do so. This is actually an area where the competitive market does work. 
The Government has adopted a very good process in bringing this bill to the House. I am very pleased that other parties are supporting this bill as part of the review of financial products and providers and I commend the bill to the House.