Tremain Chris: Reserve Bank of New Zealand Amendment Bill (No 3) — Second Reading In Committee Third Reading 
Text is incorporated into the Bound Volume 
Tremain Chris: Reserve Bank of New Zealand Amendment Bill (No 3) — Second Reading In Committee Third Reading 
[Sitting date: 02 September 2008. Volume:649;Page:18216. Text is incorporated into the Bound Volume.] 
CHRIS TREMAIN (National—Napier) 
: 
 I rise on behalf of the National Party to support the Reserve Bank of New Zealand Amendment Bill (No 3). The bill implements the main elements of the new regulatory framework for non-bank deposit takers. It deals mainly with prudential regulations for non-bank deposit takers. There is a suite of bills currently before Parliament and the Finance and Expenditure Committee including the Financial Advisers Bill and the Financial Service Providers (Registration and Dispute Resolution) Bill which will add to the portfolio of products aimed at hardening up the regulation of non-bank deposit takers. 
I acknowledge the members of the Finance and Expenditure Committee which dealt with the bill and particularly my colleague from the Hawke’s Bay Craig Foss whose experience in matters of banking is excellent and certainly helped us to understand the issues in the bill. I think Craig will be heavily involved in the Financial Advisers Bill as it goes forward and his contribution needs to be acknowledged. 
We are focusing on Part 1. I want to look at a number of clauses within it starting with clause 8 which deals with policy advice. The clause was amended by the select committee to clarify that the advice that can be requested by the Minister under the regime must be connected with the functions of the Reserve Bank. The advisory function of the bank must not limit the bank in the performance of its primary role. The primary role of the bank is dealing with monetary policy the official cash rate and the policy targets agreement. We wanted to clarify that the bank’s additional responsibility to provide advice to the Minister in relation to non-bank deposit takers was secondary to its responsibility for monetary policy. We wanted to make it clear that the bank’s predominant role is and will always remain dealing with monetary policy. 
The select committee inserted new clause 8A to make sure that any information collected from non-bank deposit takers would remain confidential to the Reserve Bank in the same way that information it collects from the main banks is kept confidential. There were further amendments by way of insertion of new clauses 8B 8C and 8D and they were interesting amendments. Mr Woolerton may recall that currently the Governor of the Reserve Bank and the deputy governor cannot have an interest in any banks that operate within New Zealand. We felt it was really important that the governor and the deputy governor not have an involvement a financial interest in any non-bank deposit takers as well to avoid conflicts of interest that could cause issues down the track—particularly given that the bank is seeking quite detailed information from non-bank deposit takers. 
The key part of Part 1 is new Part 5D inserted by clause 11. New Part 5D is a new part of the Reserve Bank of New Zealand Act 1989. It relates specifically to the regulation of deposit takers. It adjusts the Act to allow the Reserve Bank to deal with non-bank deposit takers. New Part 5D is the substantive part of the bill—a very important part. I want to talk about a number of important provisions in it. 
I will talk firstly about the provisions that deal with the definition of deposit takers. That definition is very important. It is vital to defining what type of organisation this bill applies to. Members of the committee heard from a number of submitters who were concerned that they would now have compliance costs accorded to them unnecessarily because in fact they were not in the business of taking deposits from members of the public. We made it clear through new section 157C which organisation would and would not fall under this regime. 
There is an interesting point in subsection (4). It allows groups to be excluded from or included in the regime by Order in Council. That is a point I wanted to highlight. I also want to highlight what came to be known as the “hire business clause”. The “hire business clause” comes in via subsection (5). It allows the governor the power to exempt—or to include for that matter—a business according to the nature of its business activities. The concern from the likes of hire businesses which take deposits from customers for hire equipment was that they would be considered deposit takers when in fact the principal reason for their business was to hire out products to consumers on a day-to-day basis. Although they take deposits to prevent the products from being stolen or damaged their principal business is not being deposit takers. We inserted that provision to make that very clear and that is good. 
I want to touch on new section 157I which insists that deposit takers must have a current credit rating. You see up until this point in time non-bank deposit takers have not been required to have a current credit rating although some do have one. Hanover Finance I believe had a BB+ rating—which did not prevent that company from falling over. The fact of the matter is that now under this legislation non-bank deposit takers that are defined as such must have a credit rating. New section 157I insists that that be the case. 
The committee had a look at that and we put in a new provision to define the principles to be followed by the bank in deciding whether to approve a certain credit agency so that New Zealanders can have some surety that the credit agencies that are being used to provide these credit ratings have some substance to them. Members will see a range of measures in new section 157J that define the principles to be followed. 
That is all I want to say on Part 1. I will leave it at that point. Part 1 is the substantive part of the bill. It defines how we are to adopt credit ratings for non-bank deposit takers. It brings non-bank deposit takers under the auspices of the Reserve Bank of New Zealand Act and I think that is a good thing. That is why the National Party will support Part 1 going forward.