Graham Kennedy: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Graham Kennedy: Reserve Bank of New Zealand (Covered Bonds) Amendment Bill — First Reading 
[Sitting date: 22 May 2012. Volume:680;Page:2274. Text is incorporated into the Bound Volume.] 
Dr KENNEDY GRAHAM (Green) 
: 
 The Green Party perceives the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill to be a sign of the times. It is essentially a post - global financial crisis tourniquet applied to the failing patient that is the global financial system. What we are doing here is seeking to ring-fence uncertainty and bolster investor confidence where that confidence is flagging.  
All parties support the bill. The Green Party does not oppose the bill although in light of the excruciating appreciation from our colleague Mr Bennett I would be tempted if I had the time to go back to caucus. But we will steel ourselves and persevere. We do think the bill is necessary but we think also it is a sad metaphor for the financial plight we are all in around the world.  
What does the bill do? It establishes a legislative framework for the orderly development of a new debt market in covered bonds to the tune of 10 percent of total assets a covered bond being a dual recourse instrument for an unsecured claim on the issuing bank and a secured claim on a specific pool of assets. So if the bank goes into liquidation the creditor has an independent security on those assets. Those assets are to be held by a separate entity separate from the bank—a special purpose vehicle. What is in it for the bank? The bank does not have to pay an uncertainty premium and it increases the bank’s access to the covered bond market. This mutuality is expected to increase investor confidence. The facts are that in Europe there has been for some time a €2 trillion market in covered bonds. The US Canada and Australia have recently entered the market with New Zealand tagging along behind beginning issuing in 2010 without a legislative framework.  
I have listened with interest to the debate this afternoon and this evening. The difference to be seen is with National which claims that this bill will “give certainty” that there is a need for discipline and that there is a need and a wisdom to follow Australia and synchronise with Australia and to rebuild confidence. So there is an affirmation of financial confidence emerging from the National perception. From Labour we have the assurance that it is an understandable initiative that Labour will support but that it will not fix the main problem of the negative net international investment position where we are somewhere around the sixth-worst in the world and that it has given some Labour members at least considerable dyspepsia because it discriminates in favour of the larger corporates and against the mum and dad investors.  
The policy of the Green Party was determined and articulated by my colleague Russel Norman. We basically recognise the need for this bill in the current circumstances because it will establish a credit flow into New Zealand and it will increase the principle of financial resilience which now is up there with the principle of economic efficiency and we recognise that. But there is a flaw in this bill and the principal flaw is that the bill will emerge with a reliance on the private sector for oversight as in the wolves guarding the hen house. We will go into the Finance and Expenditure Committee intending to support the bill but with a strong concern that there needs to be independent monitoring by the Reserve Bank. The Reserve Bank has said it has no appetite for monitoring and we need to persuade the Reserve Bank to acquire an appetite. There needs to be independent monitoring in this bill and on that basis and with that expectation the Green Party will support this bill.