Hobbs Marian: Westpac New Zealand Bill — First Reading 
Hobbs Marian: Westpac New Zealand Bill — First Reading 
[Volume:630;Page:2300] 
Hon MARIAN HOBBS (Labour—Wellington Central) 
: 
 I move  
That the Westpac New Zealand Bill be now read a first time. 
 This is a private bill promoted by Westpac Banking Corporation for Parliament’s consideration. In accordance with the Standing Orders the notice of intention to promote this private bill has been distributed to those persons who have a direct interest in the subject matter of the bill. It has been advertised publicly and I commend it to the House. At the appropriate time I will move that this bill be referred to the Finance and Expenditure Committee. 
The bill provides a mechanism to enable Westpac Banking Corporation’s retail business in New Zealand to be vested in a New Zealand incorporated subsidiary: Westpac New Zealand Ltd. Westpac Banking Corporation has operated in New Zealand since 1861 and currently operates in New Zealand as a branch of its Australian parent. The establishment of a subsidiary enables Westpac to comply with the Reserve Bank of New Zealand’s local incorporation policy which was introduced in 2003. This policy provides that foreign-owned banks over a certain size are required to establish a New Zealand subsidiary with its own board of directors that is required to comply with New Zealand company law. 
The policy assists the Reserve Bank in its regulatory approach in two ways: first by reinforcing the importance of the self-discipline of banks by obligating bank directors to attest to the veracity of financial disclosure made by banks through their general disclosure statements. To date this has been done by Westpac’s Australian board and its New Zealand chief executive. Following incorporation it will be done by the directors of the locally incorporated bank which will include at least two New Zealand - resident independent directors thereby increasing some of the local accountability. Secondly the policy provides for greater legal certainty over ownership of the assets of the bank in the event of a bank failure under New Zealand law. This can help prevent a bank failure from spilling over to the wider financial system and developing into a systemic crisis. 
 Westpac and the Reserve Bank negotiated for some time over whether it would be necessary for Westpac to establish a subsidiary or whether another suitable solution existed. Ultimately the Reserve Bank was not satisfied that another suitable solution could be found and it has required Westpac to comply with its policy by establishing a locally incorporated bank. This bill provides for a new chapter in the long history of Westpac in New Zealand by creating the legal framework for the vesting of the assets of Westpac Banking Corporation’s New Zealand retail business into a New Zealand company: Westpac New Zealand Ltd. 
Westpac Banking Corporation has a significant history in New Zealand. It is one of New Zealand’s oldest financial institutions having begun life in New Zealand as the Bank of New South Wales in 1861. The bank expanded rapidly—it was the time of the gold rush—and was already operating out of eight branches throughout New Zealand by February 1862. In 1982 the Bank of New South Wales merged with the Commercial Bank of Australia which also had operations in New Zealand and the banking group became known as Westpac Banking Corporation or Westpac with the new name reflecting the bank’s focus on developing its business in the western Pacific region. In New Zealand the merger of the New Zealand business of Westpac Banking Corporation with Trust Bank New Zealand Ltd in 1996 led to the formation of Westpac Trust incorporating the two elements of the merged business. 
The relationship Westpac has with New Zealand is reflected in a number of ways from the historical buildings throughout the country that bear the original names of the Bank of New South Wales and the various regional banks that became trustee savings banks to the key sponsorships Westpac provides in sport the arts and through the red rescue helicopter. While Westpac has a long history in New Zealand of operating as a branch of its Australian parent company the Reserve Bank of New Zealand now requires for the purposes of satisfying its statutory objective to be in a position to minimise the impact on the financial system of a bank failure that systemically important banks—those that have $10 billion or more in liabilities in New Zealand other than to related parties—be incorporated in New Zealand. The retail business of the New Zealand branch of Westpac Banking Corporation currently fits this criterion; therefore Westpac is required to comply with this policy. 
Legislation is the only means by which the assets of Westpac Banking Corporation’s New Zealand retail business can be vested in Westpac New Zealand for two reasons. Firstly it is the only means by which Westpac Banking Corporation’s New Zealand retail business can be vested in Westpac New Zealand efficiently and economically without interference in the conduct and continuity of that banking business. That seamlessness is important and necessary for both the staff and the customers of Westpac. Secondly legislation is the only means by which appropriate amendments to and repeals of existing legislation can be effected as Westpac Banking Corporation currently operates under legislation in New Zealand through the Westpac Banking Corporation Act 1982. 
The private Act of Parliament approach has commonly been used for bank mergers in the past—for example the National Bank of New Zealand Limited Act 1994 and the Westpac Banking Corporation Act 1982. The bill is primarily based on a number of pieces of legislation that have facilitated transactions similar in nature to this one. The approach of using legislation to facilitate the vesting and a subsequent vesting order to contain the details of assets and liabilities to vest finds its origin in the health board model adopted in the Health Sector (Transfers) Act 1993 which in turn followed an approach previously used in the New Zealand Railways Corporation Restructuring Act 1990. 
The bill also contains provisions commonly used in merger legislation provisions previously used in bank merger legislation provisions specific to Westpac’s circumstances and provisions repealing section 23 of the existing Westpac Banking Corporation Act. Accordingly the bill provides the overall legal framework for the vesting of assets and liabilities from Westpac Banking Corporation to Westpac New Zealand. The vesting is then implemented by a detailed proposal that must be approved by the Governor-General on the recommendation of the Minister of Finance by Order in Council. The requirements of the proposal to be included in the vesting order are set out in the bill and are based closely on the health sector model. Given the level of detail required to specify the assets and liabilities being vested and the fact that the assets and liabilities of the business are constantly changing a vesting order is the preferable way to manage this complexity. 
The bill provides for Westpac New Zealand Ltd to be the universal successor to minimise the risk that the change of ownership would not be recognised where contracts are subject to foreign laws. A number of common merger provisions have been included in the bill such as provisions dealing with employees—the terms and conditions of employment are to remain the same continuity of employment is to be maintained and no claims arise from the transfer—provisions ensuring that the proposal does not place Westpac in breach of contract or of laws and provisions to ensure tax neutrality on vesting. In addition provisions specific to bank mergers have been included to ensure that the customer relationship will be unchanged contracts are fully enforceable by the new entity legal proceedings are not prejudiced and documents remain evidence. 
Finally the bill repeals section 23 of the Westpac Banking Corporation Act which gives New Zealand depositors priority over Westpac Banking Corporation’s New Zealand assets and requires the bank to have positive net assets in New Zealand. This section is no longer required as all of Westpac Banking Corporation’s retail deposit business will vest in and be conducted through Westpac New Zealand Ltd. Westpac New Zealand Ltd will be subject to direct supervision by the Reserve Bank of New Zealand and will have to comply with its policies. 
I have already referred to the practical considerations that underlie the necessity for this private bill. However in conclusion it may be useful to reiterate for the benefit of members some of these considerations. Without the legislation customers’ bank accounts in Westpac Banking Corporation could not legally be transferred unless each customer agreed to the transfer individually. That would cause considerable disruption not only to the beginning of the operations of Westpac New Zealand but also to all Westpac’s 1.3 million customers. On that basis I commend this private bill to the House and I am confident that the House will support it. At the appropriate time I intend to move that the Westpac New Zealand Bill be referred to the Finance and Expenditure Committee.