Willis Nicola; Robertson GrantNICOLA WILLIS (National): Thank you Madam Chair. I'm rising to speak to a Supplementary Order Paper (SOP) in this section of the bill and to commend that SOP to the House. The SOP is in the name of Andrew Bayly; it is SOP 46. What it seeks to do is to reflect the fact that the activities of the Reserve Bank can cause fiscal risk for the Crown—that is the Crown could have huge amounts of money expended by the Reserve Bank within the current framework that is before the House as we speak. It's National's view that the Minister has a legitimate role in managing those risks and that that can be balanced against the Reserve Bank's requirement for operational independence. What Andrew Bayly has put forward in SOP 46 is a quite tidy framework I think in that it picks up and mirrors very exactly the framework for foreign reserves management that already exists in the Act. This is a proven mechanism and one that has met the tests for balancing that need for accountability and also that need for operational independence. What it seeks to do is have the Minister and bank agree on a framework for how capital and financial risk management will occur including things like for example the minimum levels of capital that must be held the optimum levels of capital that must be held and the ceiling levels of capital that the bank should maintain. Of course the reason for this is that we don't think it's in the interests of any Minister of Finance to have the Reserve Bank able to put the fiscal position of the Crown at significant risk by incurring huge amounts of expenditure for example that were not expected by the Minister. So my question for our Minister of Finance is whether he would give consideration to this SOP and if not why he thinks that the capital and financial risk management framework shouldn't replicate that found elsewhere in the Act for foreign reserves management. I'd point out here that this isn't a completely novel approach. If we look at the United Kingdom there is a statutory memorandum of understanding between the Treasury and the Bank of England and that includes a target level for the bank's loss-absorbing capital as well as principles for determining which monetary policy or financial stability operations should be undertaken on the bank's balance sheet and which should be indemnified by the Treasury. In the UK that approach is seen as reinforcing the bank's independence and resilience and providing greater transparency to the finances therefore reinforcing the stability of the financial system. I would ask the Minister why such an approach as set out in SOP 46 shouldn't occur in New Zealand.Hon GRANT ROBERTSON (Minister of Finance): I thank the member very much for her questions. Essentially this comes down in many ways to a philosophical position here about the way in which the operational independence of the bank can be protected whilst Parliament and indeed the Government is in a position to be able to effectively set a framework. So what the bill now does is give a control for the Minister to set financial boundaries and within those boundaries for the bank to continue its operational independence. That gives the Minister a reasonable say I would say. That happens after we consult with the bank. That power in the Supplementary Order Paper would weaken the Minister's power to set those boundaries by requiring us both to agree on those and then unbalance the independence equation. So I like the clear separation that we've achieved through the bill as it stands where I decide the boundaries as a Minister and the bank operates within them rather than muddying the waters of that transparency and independence.