Dalziel Lianne: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
Dalziel Lianne: Crown Retail Deposit Guarantee Scheme Bill — First Reading Second Reading In Committee 
[Volume:657;Page:6103] 
Hon LIANNE DALZIEL (Labour—Christchurch East) 
: 
 I want to focus on the fact that the statement that the Minister of Finance made in announcing the extension to the retail deposit guarantee included a list of all the changes that will take effect after 12 October 2010: the fees to be paid will be changed to reflect the institution’s risk profile eligible bank deposits will be covered up to a maximum of $500000 per depositor per institution eligible non-bank deposits will be covered up to a maximum of $250000 per depositor per institution and deposit-taking institutions with a credit rating of BB or higher can apply to participate in the extended scheme. Then it stated that collective investment schemes will not be eligible for the new scheme. 
I have looked through the regulatory impact statement and I cannot find a detailed analysis of why the decision was made that collective schemes will not be eligible for the new scheme. Under the existing scheme collective investment schemes such as portfolio investment entities unit trusts and superannuation schemes are able to claim on the guarantee provided that they invest exclusively in New Zealand Government securities or debt securities issued by institutions covered by the Crown guarantee; they do not increase their investments in guaranteed institutions that are not registered banks beyond the level that existed as at 12 October 2008; and their rules ensure that any money paid under the guarantee will be distributed only to retail members. I thought those were a relatively tight set of criteria. 
I did not download the number of schemes that have been approved but on 25 August when the extension was first announced I had a look at the website and I seem to recall that a number of portfolio investment entities had been accepted and were guaranteed under the existing scheme. I would really like to understand the thinking behind the decision to leave out collective investment schemes altogether. There is not even the opt-in option any more but simply a decision that they will not be eligible. What was the thinking behind that decision? I am relatively sure that some of those schemes are currently under the guarantee. I think those institutions themselves would be somewhat concerned that there is not the detailed analysis that there is of some of the other examples that I have already used in my contribution to the debate. 
It is quite a serious issue because as some of my colleagues have raised the real risk is having too great an influence on investment decisions and distorting the market as it were in this whole area. I have been making the comment for a number of years now that we cannot get rid of risk and that there will always be risk in this financial area because otherwise there is no return. Then we introduced the retail deposit guarantee scheme which somewhat diminished the argument I was always making. But the scheme is only a temporary measure and it is for an extreme situation. So it does raise for me the question of why it was decided that collective investment schemes would be left out. Has there been consultation with the operators of the different schemes? And what has been the response? I have looked through all of the issues raised in annex 3 and there does not appear to be any specific reference to collective investment schemes. I may be wrong. If the Minister would like to take a call on that it would be very useful.