Smith StuartFRIENDLY SOCIETIES AND CREDIT UNIONS (REGULATORY IMPROVEMENTS) AMENDMENT BILLThird ReadingSTUART SMITH (National—Kaikōura): I move That the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill be now read a third time. It is a great day for me and for the credit union and friendly societies sector to have a much needed upgrade to outdated and inadequate legislation. This has not been for the want of trying. This particular bill has had several lives but never quite got in front of the Parliament. It's here today and I hope with great anticipation that it passes through the third reading today. It has had unanimous support to date.I would like to thank all of the submitters to this bill and the Finance and Expenditure Committee for the hard work that they did. The submitters they weren't unanimous in their support unlike the Parliament has been to date but their concerns were allayed in an amendment that we put to the bill which underlined a belts and braces—bulletproof if you like—amendment to ensure that mutuality would not be impinged by this bill. I thank the select committee for the collaborative and cooperative way that they worked to ensure that we could get that amendment in place.I also would like to single out Michael Webb who's in the gallery who has been a fantastic resource for technical information. This is a very technical bill and it is actually amending a very technical Act. I have had a great journey learning a lot about the sector but I'd like to acknowledge Michael Webb for the contribution he made so I thank him.So this sector has been operating for 60 years and touches nearly one in 20 Kiwis servicing their financial needs and it's a significant contribution to the New Zealand economy. The bill will allow additional growth for this sector which has been constrained by the legislation. The scale and efficiency gains will enable them to deliver the services to their members at a time when competition in this sector is most needed.I can point to provincial New Zealand where small communities are in a position where often the trading banks are consolidating into large communities and they are left without any face-to-face banking service. Often what they're only left with is an automated teller machine (ATM) and when a person needs to go for a face-to-face meeting they have to travel some distance. This is an opportunity for credit unions to get out there and to service those communities and that will be greatly appreciated.The credit union sector and mutual buildings sector have assets of $2 billion—so it's not an insignificant industry at all—and they operate in 68 branches from Whangarei to Invercargill and I anticipate those branch numbers will increase as a result of this legislation.As I said it's antiquated and outdated legislation although this sector services 190000 members. Despite the legislation the sector has shown that it is quite nimble and able to work even with the fettered legislation and rules around the sector. They are offering transactional banking internet and mobile banking EFTPOS and MasterCard and debit cards and a nationwide ATM network and it's all underpinned by a tier one core banking system and that is also with a sophisticated anti - money-laundering system. It also has an ATM switch that also connects a third of New Zealand's ATMs so it's quite significant.So now I want to turn to what the bill does. The bill allows credit unions to become bodies corporate giving them what is known as the capacity and powers of a natural person. That will bring them into line with other mutuals and building societies and cooperative companies and that will do so without lessening any of the particular characteristics of credit unions such as the mutuality common bond of the credit unions one member one vote—all of those things that we know credit unions for. And it will reduce uncertainty and compliance costs. Sometimes it has been that credit unions have had to seek often conflicting legal advice to tidy up and to ensure what they are doing is correct and that has been really through no fault of anyone other than that the law has fallen behind what is common practice today.Making the credit unions bodies corporate means that they will no longer have to have trustees to hold assets or operate. This was an inefficient and bureaucratic requirement which really did fetter the credit unions and doing away with that need for internal trustees will reduce another layer of administration and cost and make it much simpler to do business.I can give you an example. Any decision currently that a board makes that involves a credit union's assets also needs a resolution to go through the trustees. So that has to be prepared by the board. Then if a trustee is going to be overseas at that time the credit union is required to put in place a temporary power of attorney so that someone can step in for that person—that trustee. And you can imagine the times when they're running around town trying to get someone to sign a piece of paper just so that they can operate in a normal and modern way. So this legislation will make sure that that is done away with. It also removes the uncertainties as to who is responsible for the governance of the credit union. So I think that's a very important point as well.A further major change will allow credit unions who wish to do so to generate new sources of revenue and to expand their services. And in particular it will allow them to lend to small and medium sized enterprises (SMEs) that are related to its members. Those activities have in fact been lost to the major trading banks. So we've often seen a member of a credit union who has a small to medium sized enterprise who cannot borrow money directly for that SME through a credit union and they have taken all of their banking to a trading bank and that's not in the spirit of what we would like to see. That will also be very important in rural and regional New Zealand and the smaller parts of cities where as I said earlier the trading banks have—abandoned" might be too strong a term—consolidated into the larger centres. So the day-to-day need to see face-to-face banking for a SME's business needs is much higher than just making a home loan although that's important as well and that will mean the space available for credit unions to operate successfully within small areas and small towns will be greatly enhanced by the change of this legislation. In fact I understand one credit union is already looking at entering into this field and is allocating significant resources in anticipation that we will pass this bill today so that it can help its members who have small to medium sized enterprises. This will also streamline the objects and powers of association for credit unions and Co-op Money is a credit union that operates here in New Zealand and it offers the banking platform that credit unions operate under I alluded to before. That would be far too expensive for an individual credit union to operate on its own but being able to utilise that with a cooperative association is much needed and has cleared up also that an association can provide services to third parties to the benefit of the member credit unions and that was in some doubt under the law.So in summary this is a much needed update to the legislation. It will be welcomed by the sector and in a fast-changing world we're actually seeing that the credit unions have a much bigger space to occupy than we would have thought a few years ago. This legislation will enable them to provide those services to their members. While I knew very little about the credit union sector before I got involved with this legislation this is a vital part of our financial system and it will actually provide some much needed competition into that area. I welcome the bill and I commend it to the House."