Brash Don: Reserve Bank of New Zealand Amendment Bill — In Committee 
Brash Don: Reserve Bank of New Zealand Amendment Bill — In Committee 
[Volume:610;Page:7893] 
Dr DON BRASH (NZ National) 
: 
 The commencement date was originally scheduled for September last year and we are now being asked to amend that. We have no alternative other than to amend it because September last year has already passed. However it is a serious matter that this bill has taken as long as it has to get to the House. 
In a sense the bill had its origins in the 1999 Labour Party manifesto. In that policy manifesto the Labour Party promised to undertake a comprehensive review of the way monetary policy was conducted at that time and during the 1990s. In due course the newly elected Government appointed an internationally regarded expert Professor Lars Svensson to look at the Reserve Bank. That was done during the middle of the year 2000. Mr Svensson came to New Zealand in November 2000 and reported in February 2001. It is now August 2003. What is surprising about the gap of more than 2 years since February 2001 is that there was essentially no disagreement about how to react to Professor Svensson’s recommendations. The Reserve Bank made some recommendations Treasury made some recommendations and the Minister reached a judgment. The Minister discussed the conclusions with other parties in Parliament other parties in Parliament agreed with the Minister’s judgment and the matter was then agreed across the board. But even then we had longer to wait. 
The bill was I think introduced in April 2002—when a previous person was the incumbent governor. I was certainly happy to support it at that point and I am happy to support it now but it is a pity that a further 16 months have gone by since the bill was introduced. The only good thing about that is it has enabled the Reserve Bank to add into the bill further material that deals in particular with the Continuous Linked Settlement bank that Mr Prebble commented on in his speech. It has been fortunate indeed that that issue can be dealt with in the bill because it is important that the issue is dealt with. 
As I mentioned during the second reading debate the Continuous Linked Settlement bank was set up to deal with a very important risk involved in foreign exchange transactions across time zones. That risk first became evident in 1974 when a German bank Herrstatt Bank failed and for the last 29 years—nearly 29 years anyway—the world has wondered how to deal with Herrstatt risk. New Zealand clearly recognised the need to deal with Herrstatt risk some years back but until the Continuous Linked Settlement bank was up and running it was not possible for us to deal with it. But then alas we discovered we were not able to join the bank because of a deficiency in our law and we were bound to wait until the law was amended. 
I regret it has taken us as long as it has to get the amendment to this legislation into the Committee of the whole House. I very much hope that once the Committee stage is through we will have an opportunity of getting the bill to the third reading and having the royal assent just as quickly as possible. Quite frankly there is an urgent need to deal with the matters in this amendment and until they are dealt with the New Zealand banking system will be under greater risk than it need be. 
One of the other features of this bill is that as we have recognised previously it takes the governor out of the chair of the bank’s board. That is an unusual feature internationally. Internationally governors of central banks are I think universally also the chairpersons. Alan Greenspan is not the governor of the Federal Reserve Board; he is its chairman. 
Clause 2 agreed to. 
The question was put that the amendments set out on Supplementary Order Paper 99 in the name of the Hon Dr Michael Cullen to Part 1 be agreed to. 
Amendments agreed to and Part 1 as amended agreed to.