Watts SimonSIMON WATTS (National—North Shore): Thank you very much Madam Speaker. It is an absolute pleasure to rise to speak on the Deposit Takers Bill at its second reading. We have heard a number of very informed speakers this evening provide commentary in regards to this bill including the Minister the Hon Grant Robertson. As has been acknowledged by a number of speakers already this evening it is actually one of those examples where the Finance and Expenditure Committee which members on all sides of the House here are on have worked collegially together in order to prepare this bill and make some changes and improvements to it. I guess that is the purpose of the select committee process in order to place due consideration in terms of legislation but importantly to look at opportunities to improve that legislation so that it can perform its duties appropriately once it is put into law.I want to cover a few aspects in regards to my comments on this bill this evening. Andrew Bayly started off our overview and provided quite a lot of detail in terms of some of the challenges that we saw with the 13 non-bank deposit takers and I'll come back to that aspect soon. Then Nicola Willis also provided an overview in terms of the stability of the banking sector of which this legislation does provide a significant element. But in terms of setting the scene really the circumstances for which this legislation will come into effect are pretty dire fiscal and economic circumstances: a scenario in which one's bank—and particularly if you're banking with one of the four major banks—collapses. That's probably a scenario where there's a hell of a lot going wrong in the world let alone just here at home in New Zealand for one of those major banks to collapse.But you know it wasn't that long ago—even though a day in this place does feel like a year sometimes!—back in 2008 when we went through quite a significant period of global instability as a result of the banking crisis: that contagion of banking collapses and lack of certainty in the market; the camera shots of consumers standing outside retail banks in the UK trying to get their money out. They always say that as soon as the first queue forms outside the bank it is too late because when people lose confidence in the underlying banking sector and lose confidence in their bank that is probably the most important aspect. No matter how strong or good your regulation is once the consumer loses confidence that is the point at which there is no return. The Crown—or in that case in the UK Her Majesty's Treasury—was required to come in and deal with that.So the deposit takers legislation puts in place in effect a compensation-for-loss mechanism for consumers that have deposits within their banks. The reality for most people under this cost of living crisis is that the only thing most people have got with their banks is debt or mortgages or credit cards. But for those who do have deposits significant deposits—Anna Lorck: Good interest rates on deposits Mr Watts.SIMON WATTS: I'm hearing some contribution across there in regards to the current interest rate which you can get—Anna Lorck: Deposit rate.SIMON WATTS: —deposit rate—but we won't get into that detail right at the moment. But the point is that for those who do have deposits in the scenario—in the very very rare example—where a major bank will collapse and the person potentially has at risk their deposit which they won't get back this mechanism provides a mechanism in order to provide that compensation for loss. I think in regards to the stability of the overall banking system that is an important component. It is not unique; it is a component of many international banking systems to have a mechanism of that sort to provide that degree of trust and confidence in the integrity of the banking system should that scenario play through.The other aspect—and it wasn't lost on the committee—is in regards to the New Zealand context in contrast even to the Australian context or more broadly the international context. I remember conversations that we had around some of the learnings of overseas banks who have been through these phases and periods of financial collapse and subsequent banking collapse—what they have learnt from it. The Hon Paul Goldsmith was saying can he have a call—not this evening but maybe at another opportunity in the third reading Mr Goldsmith. But what was I talking about? I was talking about the aspect in regards to the UK banking model around the exposure. The New Zealand model is actually pretty benign in regards to even the Australian model. We don't have significant investment banking operations. That won't form part of our major banking operations here. A lot of the counter-party risk and the trading risk in regards to the underlying assets and liabilities on the banks' balance sheets aren't managed here onshore for many of our banks. It is actually managed in Australia and that is quite a different banking make-up. The make-up of the banks that operate in New Zealand is primarily retail banks where offshore many of the ones which have collapsed in the past have had a much wider diversity of banking operations which just simply isn't the case—which means in part actually again the risk profile in a New Zealand context is significantly lower than in an overseas sense.We spent quite a lot of time in regards to those 13 non-banking deposit takers—those credit unions and those smaller banks—which I think most of us will be able to relate to and particularly down South. There's a number of these entities—of course there are in the North as well but I was thinking about the South when I was looking across to my colleague Joseph Mooney and the great work he does in his electorate. For the 13 non-banking deposit takers I think the challenge for them was around scale. These are small entities making up probably less than 5 percent or even lower than that as a total proportion of the New Zealand banking sector. They don't have the scale capability or competence in terms of staff and technical expertise that the big four do.So a number of the challenges back from that sector—and rightly so I think—were that we are simply not equipped to deal with the regulatory burden that such legislation will place upon them. And as a result the ability for them to both scale up to deal with that but also to be able to comply with some of the regulation was seen as a cost burden that was unevenly spread on that aspect of the sector. I think it is a credit to the Finance and Expenditure Committee that that was given due consideration and I think where we landed taking on board the feedback from those entities is a position which I think is appropriate. As Andrew Bayly said time will tell in terms of actually the practical implementation of this bill as time flows through.The other aspect that we discussed in regards to this bill was around the role of the Reserve Bank actually in terms of the administration of this legislation. It was fair to say that the unfettered powers that the bill would put within the hands of the Reserve Bank of New Zealand was an area of question and debate. I think it's not unreasonable to ensure when the provision of powers is given to a single entity that that needs to be appropriately balanced. We spent quite a bit of time ensuring that there were the appropriate controls and belts and braces in regards to their role. Again I think we've ended up in a position where their regulatory oversight in regards to this legislation has been balanced with the fact that actually they and the decisions they make can result and will result in compliance costs and burden on a number of players—and again as was said more heavily actually impacting on the smaller players than the bigger players because of their ability to deal with that.I think just to finish off in the interests of time—Hon Paul Goldsmith: Ha!SIMON WATTS: Was that a call for another 10 minutes the Hon Paul Goldsmith? I don't think it was but if it was I appreciate your enthusiasm in this speech because it is an important area of financial stability for our country—Andrew Bayly: It looked like you were interested.SIMON WATTS: And it's good to have you back Andrew Bayly. I'll just finish off the end of this but overall the National Party will continue to support this piece of legislation in the collegial interests of financial stability for this country. It's with that that I commend this bill to the House.