Westpac New Zealand Bill — Second Reading 
Westpac New Zealand Bill — Second Reading 
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Westpac New Zealand Bill 
Second Reading 
CHRIS TREMAIN (National—Napier) 
 on behalf of  
Craig Foss (National—Tukituki) 
: I move  
That the Westpac New Zealand Bill be now read a second time 
. I move the motion on behalf of my colleague the chairman of the Finance and Expenditure Committee Craig Foss who is currently representing the Government in Hanoi at the Asian Development Bank annual general meeting. Craig has been shepherding the bill through the House and will continue to do so as it progresses from this point forward. 
The bill is a private bill promoted by Westpac New Zealand Ltd. The bill provides a mechanism to enable certain assets and liabilities of Westpac Banking Corporation in New Zealand—principally assets and liabilities of Westpac Banking Corporation’s New Zealand institutional banking business—to be vested in its New Zealand subsidiary Westpac New Zealand Ltd. 
Westpac is one of New Zealand’s oldest financial institutions. This year it is celebrating its 150th anniversary in this country. Westpac is one of four banking groups that have dual banking registration in New Zealand. It operates in New Zealand through both the Westpac Banking Corporation New Zealand branch and a locally incorporated subsidiary Westpac New Zealand Ltd. 
Westpac New Zealand Ltd was incorporated and became a registered bank in 2006 in order to comply with the Reserve Bank of New Zealand’s local incorporation policy. The policy provides that systemically important banks should be incorporated in New Zealand. A bank is regarded as systemically important if it has liabilities other than those to related parties in excess of $15 billion. Westpac Banking Corporation’s New Zealand branch has a condition of registration that provides that its external liabilities are not to exceed that amount. 
Having regard to the local incorporation policy Westpac Banking Corporation and Westpac New Zealand Ltd have agreed with the Reserve Bank that Westpac Banking Corporation will transfer certain assets and liabilities—principally assets and liabilities of its New Zealand institutional banking business—to Westpac New Zealand Ltd. The transfer will reduce the size of the New Zealand branch and help to ensure that it continues to remain below its external liability cap both in periods of growth and in periods of market volatility as we go forward. 
The transfer will also mean that Westpac New Zealand Ltd will increase in size. That is beneficial in terms of the local incorporation policy as it will allow the Reserve Bank to have greater control over the assets and liabilities being transferred were there ever to be a bank failure event. 
When Craig Foss moved the motion for the first reading of the bill he noted that legislation is the only means by which the designated assets and liabilities can be invested in Westpac New Zealand Ltd efficiently and economically without disrupting the conduct and continuity of Westpac New Zealand’s banking business. The bill also ensures minimal disruption to Westpac’s customers employees and suppliers. 
The Finance and Expenditure Committee has made some minor amendments to the bill. They are marked on the bill that is on the Table. I am sure Amy Adams and other members of the Finance and Expenditure Committee will pay close attention to the detail of those amendments to make sure they are clear to the New Zealand public as we go forward and I look forward to Amy’s speech in that respect. 
I offer my thanks to members of the Finance and Expenditure Committee for their thorough examination of the bill and for ensuring the timely return of the legislation to the House. The Finance and Expenditure Committee is an excellent committee with members from across the House who do extremely good work and I commend them for their work in the committee. 
I also acknowledge the constructive cross-party examination on this issue. It is important when dealing with these sorts of matters to reach consensus where possible. A strong and functional banking system is important to New Zealand and as Craig noted when he moved the motion for the first reading of the bill in a small but important way the bill helps make the banking system of New Zealand stronger. I commend the bill to the House. 
STUART NASH (Labour) 
: 
 I am quite saddened that I missed the climax to David Bennett’s career: being thanked for the passing of the Hamilton City Council (Parana Park) Land Vesting Bill. It is a crowning achievement with which he will be able to go to the electorate and say that after 6 years he achieved it for the people of Hamilton. At least he did not sell it—but maybe he is planning to. I do not know. He did not sell this one—he might have even nationalised it. 
Anyway it is good to follow Chris Tremain because as Mr Tremain said every party in this House supports the Westpac New Zealand Bill. Mr Foss brought it to the House. It is a common-sense bill and Labour supports it. There are a number of reasons why we support this bill: it is common sense it is absolutely necessary legislation and Labour has always supported any sort of financial legislation that we believe improves business integrity and Government efficiency. What people will find is that the vast majority of bills that come through this House in support of business integrity and Government efficiency and increase the ability of everyday New Zealanders to have confidence in financial markets Labour will support. I know that over the last 3 or 4 weeks I have spoken on a number of those bills. It is a common-sense approach. 
Of course there are certain types of bills in respect of banks that we do not support. A classic one is that we certainly would not support the sale of Kiwibank which the Government wants to do. We certainly would not support the sale of BNZ. I think we heard today that BNZ was sold for $1.5 billion and is now returning dividends of over $15 billion. That is the sort of banking legislation we certainly would not support. If anyone is unclear about it let me just clarify: Labour does not support the sale of State assets of which Kiwibank is one. It is owned by all of us. 
This bill provides for the vesting of certain assets and liabilities— 
Simon Bridges 
: Phil has sold more assets than anyone else. 
STUART NASH 
: Have I just heard Simon Bridges say that he thinks Kiwibank should be sold? Is that what he has said? I challenge that member— 
Todd McClay 
: I raise a point of order Mr Speaker. The member opposite needs to have his hearing checked. Nobody on this side of the House said that at all. 
Mr DEPUTY SPEAKER 
: That is not a point of order but I will remind Mr Nash that this is a second reading speech not a first reading speech and to come back to the content of the bill. 
STUART NASH 
: Thank you Mr Deputy Speaker. I obviously heard Simon Bridges wrongly but I would love that member to hold a public meeting on asset sales in Tauranga and try to convince his constituents that it is a good idea. 
This bill provides for the vesting of certain assets and liabilities of the Westpac Banking Corporation’s New Zealand institutional businesses in Westpac New Zealand. That can be achieved only through legislation. 
Simon Bridges 
: Phil could run us through it. Phil knows more about it than anyone else in here. 
STUART NASH 
: Simon Bridges is dead right: Bill English does know about selling State assets because he sold Contact Energy in 1999 the company that returns over $100 million in dividends every year to its Australian owners. So yes Simon Bridges is dead right: Bill English does know about selling State assets. 
This is the sort of bill where legislation is the only means by which the assets of Westpac Banking Corporation’s New Zealand retail business can be invested in Westpac New Zealand. There are two reasons for that. First it is the only means by which Westpac Banking Corporation’s New Zealand retail business can be vested in Westpac New Zealand efficiently and economically without interference in the conduct and continuity of the banking business. Mr Tremain talked about that and it is the reason why the bill has come through the Finance and Expenditure Committee. It is most important because there can be no disruption to Westpac’s business and customer base—of that there is no doubt. It is very important not only for customers but for staff as well. I have spoken many times in this House about the need for a strong and robust banking sector. 
I think the vast majority of people will agree that there are two main reasons this economy made it through the recession in the shape that it did: one the fiscally prudent way in which Dr Cullen managed the economy and reduced Government debt to such a level that there was none and secondly we had a very very strong banking sector. Dr Cullen and the strength of the banking sector ensured that we got through this economic crisis in the shape we did. 
It is just an absolute shame that Dr Cullen’s legacy has been ripped apart in 2 years by the Government. What a shame. The New Zealand Superannuation Fund used to be called the Cullen fund but Dr Cullen has asked whether his name can be removed from it because he is so embarrassed by what the Government is doing to the fund that he set up to provide for the savings of New Zealanders. 
Mr Bridges had the nerve to stand up and ask a question in the House about what the Government is doing for savings. He should have asked Minister English why he cut funding to the Cullen fund. 
Mr DEPUTY SPEAKER 
: Bring it back to the bill.  
STUART NASH 
: Of course Mr Deputy Speaker. Let us bring it back to the bill we have in hand but when Simon Bridges sits up and says we should sell State assets and cut funding to the Cullen fund it is hard not to respond. 
Anyway as mentioned this legislation is the only means by which appropriate amendments to and appeals of existing legislation can be effected as Westpac Banking Corporation currently operates under legislation in New Zealand through the Westpac Banking Corporation Act 1982. The private Act of Parliament approach has commonly been used for bank mergers in the past. For example there is the National Bank of New Zealand Limited Act 1994 and the Westpac Banking Corporation Act 1982. 
Simon Bridges 
: Who wrote this? 
STUART NASH 
: I think everyone knows that. Everyone knows how the finance and banking industries work do they not or am I mistaken? Does Mr Bridges have no financial literacy whatsoever? Mr Bridges has once again admitted that he knows nothing about the banking sector yet he had the nerve to stand up and ask his finance Minister about what the Government is doing for savings policy. He knows nothing. But to give Mr Bridges credit he did stand up in the House in a moment of honesty and admit that he lost half the cases he brought as a public prosecutor. 
Anyway this bill is important as I was saying to strengthen the local banking sector. It is most important we have a strong local banking sector. It has already been alluded to that Australasia—Australasia—came out of the financial crisis well and as mentioned the reason we did is that we had a strong banking sector. 
Amy Adams 
: Look he can read and breathe at the same time; that’s impressive. 
Simon Bridges 
: And why is this member wearing a $25 parliamentary tie? 
STUART NASH 
: Amy Adams knows that—she knows that. I think she needs to go and tell Simon to keep quiet because he does not know what he is talking about. But that is OK—that is OK. 
Simon Bridges 
: I raise a point of order Mr Speaker. I thought the rules of this House meant that a member’s full name is needed to be used in debate. 
Mr DEPUTY SPEAKER 
: Well the member is right but the member was asking for this so he has to expect something in retaliation. 
STUART NASH 
: I raise a point of order Mr Speaker. 
Mr DEPUTY SPEAKER 
: No there will be no more. The member will continue but I say to the member—and I have given plenty of leeway on this; there is about 2 minutes remaining—that when we are on a second reading speech there are a number of Speakers’ rulings that apply. I refer the member to Speaker’s ruling 106/1 and Speaker’s ruling 105/5 which are about the content of a second reading speech. To mention other things is fine and I allowed that but not continual straying even if it is responding to interjections. One must stay with the content of the bill as presented from the select committee. That is what a second reading debate is about. 
STUART NASH 
: As I was saying Labour supports this bill and the Reserve Bank also supports it. We also understand that it is very important that Westpac New Zealand has a very sound and stable New Zealand operation and enjoys the advantages and benefits of being linked to a trans-Tasman parent. For example it has to have access to capital so that it can lend to its business customers and if there is one thing we need at the moment if there is one thing this economy really really desires it is for banks to have the capital to lend to businesses. Goodness me no other plan is being shown by this Government to get business growth up and running so it needs the support of the banks. As mentioned the Reserve Bank backs this bill. It is a common-sense bill supported by everyone on the Finance and Expenditure Committee and by everyone in the House. 
But once again I will make the point that I made in the first reading. I say again that I think that Westpac should be aware that something that is demanded by the vast majority of New Zealanders—in fact by all New Zealanders—is the level of transparency that they like to see in their banks. We all understand—we all understand—the need for a strong banking sector; of that there is no doubt. Members on this side of the House understand that more than most and our banking system has held up very well. But we try to encourage the level of transparency in the banking sector such that everyday New Zealanders can have a level of confidence in banks. This bill is one thing that will help with that level of confidence. 
Another thing is the level of transparency which we tried to bring out in the banking inquiry. Labour held a banking inquiry just so that transparency could get out there and so ordinary New Zealanders absolutely knew what drove interest rates—why the Westpac bank did what it was doing with its interest rates around mortgages both fixed and floating. Unfortunately the Westpac bank did not support that inquiry. Kiwibank did and Kiwibank provided a level of transparency that all New Zealanders demanded. We are supporting this bill. It went to the select committee and had a very robust process. I think it is a very good bill. Thank you very much. 
AMY ADAMS (National—Selwyn) 
: 
 It is a great privilege to rise this afternoon and take a second reading call on the Westpac New Zealand Bill. I was a member of the Finance and Expenditure Committee which considered this bill as was the speaker who has just resumed his seat Stuart Nash. I think it is important to start off at the outset by making it very clear that this bill is about meeting the needs of the Reserve Bank’s regulatory oversight. It is more about ensuring that the Westpac Banking Corporation which is obviously one of our biggest and most successful banks is able to trade and to continue to do so within the terms of the Reserve Bank’s local incorporation policy. 
To put that oversight into context and to understand why we should focus on it I think that if there were two things we learnt from the global financial crisis the first is that we have to have a strong and robust banking sector. Even now as the fall-out continues around the world we see countries whose banking sector has let them down and the significant effect that has had not only on their economies but on the people of those countries. We are extremely lucky that in New Zealand we have a banking sector that New Zealanders can rely on. Certainly Westpac and the other major banks are a big part of that and we should be very grateful for it. 
The other lesson that was learnt from the global financial crisis is the importance of effective regulatory oversight. That is really what this bill is about. The local incorporation policy is to ensure that if there is ever a time when the Reserve Bank as the body that supervises the banks needs to take oversight control or any sort of action to protect New Zealanders the key assets are held here in New Zealand within the jurisdiction that the Reserve Bank can control. So we have this policy called the liabilities cap for the systemically important banks. 
Effectively that policy means that once a bank’s liabilities get in excess of $15 billion it has to ensure that those assets are controlled here in New Zealand. Let me be very clear that there is no question that Westpac has ever broken that cap but the transfer of those institutional banking assets from Westpac Banking Corporation in Australia operating through the branch structure in New Zealand into Westpac New Zealand is really just about future-proofing that situation and making sure that Westpac can at all times in the future continue to trade within that liabilities cap without any issues. As previous speakers have said in the debate so far a private bill such as the bill we have before us is really the only way to achieve that transfer seamlessly and effectively. 
I think the other point that is worth making for people listening at home is that this legislation does not in any way affect banking relationships with Westpac. Anyone who has an eftpos card a cheque book a savings account or whatever has nothing to fear from this: there is no difference at all. The legislation will affect only the big end of town: institutional banking arrangements. But even at that level those institutions will be seamlessly moved across into the ownership of Westpac New Zealand and private legislation is certainly a very effective way to do that. 
I will wrap up my contribution by commending the work of the Finance and Expenditure Committee in going through this legislation under the chairmanship of Craig Foss. He of course was also the sponsor of the bill and he chaired that committee quite properly and very effectively. The Finance and Expenditure Committee works very well on legislation like this. It approaches the legislation in a way that ensures that it is robust and effective and that we have not gone any wider than we need to in meeting the objectives of the bill. I think certainly that this bill’s process reflected that approach. We gave it thorough consideration. We tested the purposes the need for the bill and the width of the bill and asked whether the provisions went any further than they needed to. We are satisfied that the bill is in very good shape. 
The committee has made a couple of minor amendments. Those are detailed in the commentary on the draft of the bill that is before the House. I think this House can certainly have confidence that the bill before it is necessary and will be seamless. It will not have an impact on ordinary New Zealanders except for on their knowledge that should there ever be a banking crisis ahead of us this legislation will enable the Reserve Bank to continue its effective oversight and control of those banks that are most important to New Zealand. I commend the bill to the House. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Labour supports the Westpac New Zealand Bill being referred to a select committee and we do so for several reasons. 
Amy Adams 
: No—it is back from the select committee. 
Hon DAVID CUNLIFFE 
: Thank you. We support this bill at its second reading and we will support it right the way through for several reasons. The first is that it reflects the outgrowth of a strong domestic asset-holding position from Westpac bank which is in line with the objectives that we have for a long time taken to ensure that the domestic banking system is robust. 
We are fortunate in New Zealand that we have a number of strong banking institutions and Westpac is one of them. As an outgrowth of previous regulations the domestic size of its book has grown to the point where it requires legislation to allow it to continue outside the previous limit. That is one of the primary objectives of this bill. It is important to ensure that Westpac New Zealand Ltd has a strong and stable New Zealand operation while enjoying the benefits of linking to its trans-Tasman parent which has improved its access to capital. We note the success of the Reserve Bank’s local incorporation policy. That is one element in securing the stability of the New Zealand banking sector and it is critical that we retain sovereign oversight of our banking regulation. 
There have been a number of previous debates in this House about the fact that we need to retain a full-service Reserve Bank. There were times in days gone by when it was suggested in this House that we might in fact end up ceding to the Australia banking authorities effective control over the New Zealand banking system. There were calls for that from the major banks given their parentage. I am very glad that the previous Labour Government resisted those calls and ensured that we had an effective full-service Reserve Bank with prudential supervision. 
The bill is in this House today in part because of the effectiveness of those rules. It gives the public of New Zealand through this House the opportunity to ensure that the law is still working in the interests of all New Zealanders—that is that there is sufficient oversight over the operations of New Zealand banks including Westpac to ensure that they are strong stable and well managed. I am pleased to report that based on all the evidence we have seen in terms of the hearings on this bill there is no doubt that Westpac meets those criteria as do others. 
There are a number of related concerns that we would be remiss not to mention in respect of the banking system and some of the major banks in particular. The first is that we have been through a shocking time with the global financial crisis. Although it is true that we have enjoyed some of the world’s strongest banks in our region and it is also true that they have been plain vanilla banking rather than indulging in a whole lot of derivatives which cost so much to the American market and were in large part behind the collapse of September 2008 none the less there is a linkage between the influence of the financial system and some of the economic problems we face today. We cannot blame a bank for making money but it is the responsibility of policy makers to see how that is done. 
The fact is that in New Zealand we have had a huge housing bubble. We have net international debt that is about 85 percent of our GDP. That is just about as high as some of the so-called PIGS—Portugal Ireland Greece and Spain. It is just about as high in terms of total international debt. The difference is—and we did not hear it from Mr English’s comments in question time today—that it is not public debt. It is about 90 percent private debt and of that about $6 in every $10 comes from house mortgages which were extremely profitable for the banks and extremely bad for the New Zealand economy. 
Simon Bridges 
: Where was Michael Cullen when this was happening? 
Hon DAVID CUNLIFFE 
: It is now that Labour is saying much more needs to be done I tell Mr Bridges to ensure that we never have a repeat of that bubble. I tell Mr Bridges there is no point in complaining about things that occurred before he was at school. He should think about the future when he is old enough to have kids and he can worry about their futures. 
We care about the future; we are not looking at the past. If the Government had confidence in its own abilities it would not be complaining about former Governments. It would have the strength and the courage to look forward. That is what the Labour Opposition is doing. It is looking forward to make sure that we do not have another housing bubble and that we have appropriate incentives in our banking system to ensure that we meet several objectives. 
The first objective is good prudential oversight of the banking system. It was under the former Labour Government—I thank its current members—that that was extended. The bill follows from an aspect of that prudential regulation which is ensuring a sufficient book in the New Zealand domicile from the major trans-Tasman banks. Westpac is in the fortunate position if you like that its book has grown so far that we have to have this legislation. That is a subset of that prudential supervision. 
Secondly we have to have regard for the macroeconomic place of the banking and finance system in New Zealand. We know they have contributed to a housing bubble. We know we have to go through deleveraging. We also know that the drain from the New Zealand economy of profits to the foreign-owned banking system means we can almost never run a current account surplus. Even if we export a lot more milk and wool than we import computers and petrol we still cannot make a current account surplus because we have the drain of several billion dollars a year of profits being repatriated to the foreign-owned financial system. 
People often ask what the difference is between the New Zealand and Australian economies. The biggest difference is not minerals. The biggest difference is that Australia is capital rich and we are capital poor. The reasons we are capital poor are several. No. 1 we do not save enough and No. 2 we do not own enough of our own financial system. So it is appropriate to note in passing this bill that New Zealand will need to take steady and determined steps over time working with the market in a responsible way to ensure that a higher proportion of our financial system is New Zealand - owned. New Zealanders need to own more of their own future. That is another important objective of the way we interface with the banking sector. 
I will raise one final issue in relation to the global financial crisis which has made a lot of things obvious that were not so obvious before. One of those things is the culture of excess that sometimes exists in the finance sector. We put on note in a very polite way that we do not want to see that culture of excess return to the New Zealand finance sector. We will not name any particular companies but we want to ensure that everybody in New Zealand is paying their fair share to get New Zealand through the rough economic waters we are going through so that nobody misses out nobody dodges paying their fair share the pain is spread evenly and the opportunities are spread evenly. We do not want to see millionaire bankers drinking Veuve Clicquot from dawn to dusk while a lot of New Zealanders cannot afford milk. That is not the kind of country Kiwis believe in. It is not the kind of country where we get a fair go for all where we take care of each other and where everybody gets a chance. We want a country where everybody gets a chance and where everybody pays their fair share and that applies to the finance sector as well. 
In summing up Labour supports the bill. We will support the bill right through to the third reading. I think it has the unanimous support of the House or very close to it. We support the bill because it reflects the appropriate prudential regulation of the New Zealand banking system. It reflects the fact that the previous Labour Government fought to maintain a full-service Reserve Bank. That gives New Zealand the ability to oversee its domestic financial system. The reason we are here legislating for Westpac today which we are happy to do is because that reflects the fact that its domestic book has grown to the point where it has exceeded some of those guidelines and it needs explicit legislative endorsement. There is no problem in principle with that. 
But we will retain vigilance. We will retain vigilance to ensure that prudential regulation is appropriate and tight. We will ensure that the macroeconomic settings are appropriate and that we avoid another bank-driven housing bubble. We will maintain vigilance to avoid a culture of excess returning to the New Zealand financial system rather we will move progressively towards owning more of our own future. Thank you. 
Debate interrupted.