Westpac New Zealand Bill

I move, That the Westpac New Zealand Bill be now read a first time. This is a private bill promoted by Westpac New Zealand Ltd. At the appropriate time, I intend to move that this bill be referred to the Finance and Expenditure Committee and that the committee report back by 8 April 2011. The bill provides a mechanism to enable certain assets and liabilities of Westpac Banking Corporation in New Zealand, being 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 and has operated in New Zealand since 1861, having both a branch and a separately incorporated subsidiary, Westpac New Zealand Ltd. Next year is its 150th anniversary in this country. It provides key sponsorships in the community through the rescue helicopter, the Halberg Trust, the Sir Peter Blake Trust, and Westpac Stadium, to name a few. Westpac is one of four banks that have dual banking registration in New Zealand.

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. That incorporation 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. Branches of New Zealand - registered banks, such as Westpac Banking Corporation’s New Zealand branch, have a condition of registration that their external liabilities are not to exceed that amount.

The Reserve Bank’s local incorporation policy assists the regulator by providing it with greater control over the assets of a bank in the event of a bank failure under New Zealand law. This control can help to prevent a bank failure from spilling over to the wider financial system and developing into a systemic crisis. Having regard to that 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 to Westpac New Zealand Ltd, being principally assets and liabilities of Westpac Banking Corporation’s New Zealand branch’s institutional banking business.

The transfer will mean that Westpac New Zealand Ltd will increase in size, which is beneficial in terms of the local incorporation policy, as it will allow the Reserve Bank to have greater control over the assets that are transferred were there ever to be a failure event. After the transfer, Westpac Banking Corporation’s New Zealand branch will retain its financial markets operations. The transfer will reduce the size of the branch and help to ensure that it continues to remain below the threshold going forward.

Legislation is the only means by which the assets can be vested in Westpac New Zealand Ltd efficiently and economically without disrupting the conduct and continuity of Westpac’s banking business. It is essential for customers, staff, and other contractual counterparties of Westpac that the vesting is seamless. Legislation is also the only means by which appropriate amendments to other legislation can be made.

The bill is largely based on the Westpac New Zealand Act 2006. Like that Act, the bill facilitates the vesting by providing the overall legal framework for the transfer of the assets and liabilities from Westpac Banking Corporation to Westpac New Zealand Ltd, with a subsequent vesting order containing the particulars of the assets and liabilities to vest. Consideration was given to using the Westpac New Zealand Act 2006, but that was not feasible, as it was not drafted with the intention of being used for a second vesting. That is why a new Act is necessary.

The vesting of the assets and liabilities is implemented by an Order in Council, by a detailed proposal that must be approved by the Governor-General on the advice of the Minister of Finance, given in accordance with a recommendation of the Reserve Bank. The requirements of the proposal to be included in the vesting order are set out in the bill and are based closely on the Westpac New Zealand Act 2006. Given the level of detail required to specify the assets and liabilities being vested and the fact that the assets and liabilities of the business are constantly changing, a vesting order is the preferred means of managing this complexity.

Like the 2006 Act, a number of common merger provisions have been included in the bill. The bill also ensures tax neutrality on vesting. As the transfer is being done in order to comply with regulatory requirements, it is appropriate that no tax liability arise or tax gain be triggered by the transfer. The Inland Revenue Department has been consulted and is satisfied that the bill achieves the correct tax policy result. The Reserve Bank and Treasury have been consulted and are also satisfied that the bill does not raise any concerns from a financial stability perspective.

New Zealand has a strong and functional banking system. We have all seen that in the way New Zealand has come through the global financial crisis without the turmoil in the banking sector that has been seen offshore. Having a strong banking system matters. I think that this bill, in a small but important way, makes the banking system stronger.

I commend this private bill to the House. At the appropriate time, I will move that it be referred to the Finance and Expenditure Committee.

I would like to—

💬 Hon Darren Hughes: A good choice.

It is pretty much the only choice, I say to the chief whip. Therefore it is a good one, if I may join the whip in expressing those sentiments.

I begin with a couple of commendations. The first is to commend the member who has just resumed his seat, Craig Foss. Without being too pointed about it, many of us on this side of the House think he is a very able member and he has been a very responsible chairman of the Finance and Expenditure Committee, which is the senior select committee. We give him a hard time around the table occasionally, but he carries it with very good grace and business gets done. It is sensible that the Westpac New Zealand Bill goes to that committee.

It is ironic, then, that the member read the speech as Craig Foss and not as the Hon Craig Foss, which many of us think he deserves to be, and that this is a private bill, not a Government bill. We could expect to have heard him give a speech like that as a new Minister. I think it reflects just how concerned the Government must be about the face of this Government, to have made the decisions it has on other matters—but that is for another day.

There is another commendation, and that is a commendation to Westpac New Zealand and its colleagues in the major banks that support the New Zealand banking industry. Whatever other comments we might make today, we recognise the importance to New Zealand of a strong and stable banking and finance sector. We certainly believe that Westpac plays a responsible part in our financial system.

At this stage the Labour Party’s position in respect of this bill is to support the bill being referred to select committee, and we have an open mind beyond that. We think that the fundamental purpose of the bill, which is to vest the institutional banking business of Westpac Banking Corporation into Westpac New Zealand, is appropriate. Westpac New Zealand, of course, is a local branch that has been set up pursuant to the trans-Tasman regulatory structure, whereby the Reserve Bank of New Zealand plays a role as guarantor of the stability and financial integrity of the New Zealand banking system, and thereby ensures that systemically important banks are anchored well enough and solidly enough in the New Zealand market to avoid two unintended situations. One would be a marginal market problem, in the event of a worse cataclysm than the financial system has suffered in the last few years, if that could be imagined. We would hate to see a situation where not enough assets were anchored in the New Zealand market to underpin its stability. So this is a move in that direction, and we commend it.

With that, it is worth repeating that the idea of having a full service New Zealand - domiciled banking regulator in the Reserve Bank has bipartisan support around this Chamber and is a very important part of our financial infrastructure.

Before I move through the provisions of the bill, I say that it is also a little ironic to see that the bill is in Mr Foss’ name, rather than in Nikki Kaye’s name. The convention, of course, is that these bills are brought forward in the name of the local MP. According to Westpac’s website, its head office and address for service are in Auckland Central, not Hawke’s Bay. One asks why the bill—

💬 Chris Tremain: We have big visions for the bay.

National does have big visions for the bay. I have a very fond spot for the bay, as I know the bay does for me; I am well acquainted with its big visions. None the less, why is Nikki Kaye not taking this bill to the House? Could it be that her colleagues somehow do not trust her to take a bill of this substance forward to the House? What is it about Nikki Kaye that has meant the Government has broken with convention and not given a private bill to the member in whose electorate the head office of the entity concerned is domiciled? That is a break in convention. It is a sign, unfortunately, that Nikki Kaye is destined to be a one-term MP, or a one-term electorate MP anyway; of course, we look forward to Jacinda Ardern being the new MP for Auckland Central very shortly. I am sure the whips would agree that we would trust Jacinda Ardern to bring a bill such as this to the House—no problem at all. She has the smarts to do it—no question.

I come back to the legislation. It is clearly important to ensure that Westpac New Zealand Ltd has a sound and stable New Zealand operation while being able to enjoy the benefits of a trans-Tasman footprint and of access to global capital through its Australian-based parent. We note that the success of the Reserve Bank’s local incorporation policy is one element in securing the stability of the New Zealand banking sector, and it is critical, as I said earlier, that we retain sovereign oversight of banking regulation. The severity and speed of the 2008 financial crisis provides ample evidence of why it is important to do this. We can accept that the transfer of assets and liabilities is best suited, given the complexity of the matter, to a vehicle such as this legislation.

It is also true that on both sides of the Tasman the banking sector is again under close scrutiny. On the other side of the Ditch the Australian Parliament has a far-reaching inquiry under way, which brings to mind that some of the parties of the New Zealand Parliament—that is, Labour, the Greens, and the Progressive party—held an inquiry into banking issues last year. It was a matter of regret that the Government’s bank, Westpac New Zealand, did not make a submission to that inquiry. It is true that some other banks made both formal and informal submissions, and it is also true that when the inquiry published its finding—which was that the major banks were not passing through in full the downward changes to the official cash rate into retail and wholesale interest rates—strangely enough, those margins corrected themselves within weeks of the report being released. Imagine the coincidence. Those margins corrected within weeks of the report being released, saving New Zealanders tens of millions of dollars of interest.

Of course, Labour, the Greens, and the Progressive party were happy to play that service. We think it is a matter of regret, however, that the Government members of the Finance and Expenditure Committee, after having said that they would consider it, repeatedly blocked having a banking inquiry under the auspices of the Finance and Expenditure Committee. There is, therefore, just a tinge of irony in the member who has brought this bill to the House—Mr Foss, who chairs the Finance and Expenditure Committee—now playing that role, as well as the other reasons I have suggested.

The inquiry in Australia is much broader based than being a simple matter of interest rate pass-through. It is talking around a whole range of issues that are, to a lesser or greater extent, also important here. The New Zealand Banking Ombudsman has said that there were a record number of complaints to her office over the last 12 months. There is growing public concern about the banking sector. None other than Westpac’s own chief executive now holds the record for being the highest paid chief executive in New Zealand, eclipsing even the chief executive officer of Telecom. I used to work with George Frazis. He is a good bloke. He is a very able executive, and there is no implied negative comment about his abilities. But it is also a matter of fact that the public regards any individual who earns many multiples of the average salary, as the chief executive officer of a bank like Westpac does, as a matter of some public concern.

I guess our call to the banking industry would be that given the climate out there, given the fact that the New Zealand public is doing it tough, given the fact that many industries are struggling in the real economy, and given that our manufacturing exporters have their backs against the wall with the high exchange rate, restraint is called for. There are no plans to do an Australian-style banking inquiry in New Zealand at this time, but politicians cannot ignore the growing calls from the public to surface issues if they continue to grow. There is a message here to the whole banking sector. It should, please, exhibit its traditional high ethical standards and responsibilities, and play its rightful role as pillars of the New Zealand business sector, pillars of the economy, and pillars of society—here not only for today but for months and years to come—and there will not be a problem.

I say as my final comment—I have said it publicly—that Westpac, as the Government’s banker, has enjoyed a privileged position. The onus on it for responsibility is higher, therefore, than on other institutions. I think we are coming close to the time when it would be appropriate for the Government’s contract to be put up through a transparent tender process.

I am very happy to rise this afternoon and take a call on the Westpac New Zealand Bill, which is a private bill introduced by my friend and colleague Craig Foss, who, of course, chairs the Finance and Expenditure Committee, and does so very well.

The events of the last 2 years have really brought into sharp focus the need for a robust and well-respected banking sector. Certainly in New Zealand one of the reasons we have come through—I certainly will not say “unscathed”—in a better position than a lot of countries is that as we have gone through these difficult times our banking system, and our banks in particular, have worked very well and have proven themselves to be institutions that New Zealanders can have faith in. Nothing is more important to a good system of financial markets in this country than for that to be the case.

A big part of that system, of course, is the Reserve Bank and the role it plays as both the central bank and the prudential supervisor of the banks. I know that the Reserve Bank took the position some time back that it is in the best interests of New Zealand and New Zealand customers that banks that operate in New Zealand to such an extent that they play an important systemic role in our banking sector should largely operate as New Zealand - registered subsidiaries, rather than as branches of offshore banks. That has certainly been the direction in which the Reserve Bank has encouraged banks to move. It is not unusual by any means for banks to have here both subsidiaries and branches of offshore entities. That is currently how Westpac operates, and I understand it is one of four banks that do so.

Westpac is one of our big banks in New Zealand, and we need it to operate well and to be in a position where, should there be an issue in the future, the Reserve Bank has complete wraparound of the issues it needs to control as part of its regulatory oversight. For that reason we have had the Reserve Bank institute the liabilities cap, which sets an amount beyond which the banks cannot rise while operating as branches of offshore entities. Although Westpac has certainly always traded within those requirements—and there is no question that it does not—this bill, with the movement of the institutional banking sectors into Westpac New Zealand and away from the branch operations, is really about ensuring that no matter what volatility is in the markets in years to come, Westpac will be in no danger of stepping outside that cap. I know that Westpac has been talking with the Reserve Bank on that issue for many years, and it is working with the Reserve Bank to that end.

This bill is reasonably small in terms of its impact, but it is symptomatic of a much wider issue that we work on in the banking sector with the Reserve Bank, which is to ensure, as I said, that not only do we continue to have a strong and robust banking sector, but also our Reserve Bank, which does such a good job of prudential oversight, has the ability and tools it needs to control all aspects of the banking operation, should that be required.

Looking through the bill I see that a couple of things are worth commenting on so that there is no confusion about the extent of the powers of the bill. There are specific provisions to ensure that customers’ relations are, effectively, seamlessly moved from one part of the institution to another. The big customers currently dealing with Westpac as a branch of the Australian company will move seamlessly through to being customers of Westpac New Zealand without any impact at all on them, and similarly with the transfer of staff and the like. That is the reason a private bill is needed to achieve those changes and to ensure that we have that seamless transition. Other than a back-end reorganisation, it will be business as usual for everyone who is dealing with Westpac.

For anyone who is listening at home and perhaps is not quite aware of the ambit of the bill, it is worth reiterating that the retail banking business—which includes the mums and dads and the people who use the branches and the eftpos cards—has for many years been encapsulated within Westpac New Zealand as a stand-alone company. Certainly there is no reason why that would change; it will not change. Only big-business customers dealing with the bank will be affected, and even those customers will have their relationships entirely protected.

The other thing worth noting in closing is that the actual transfer of assets—the specifics of what goes across—will be determined by Order in Council, as has always been the case with such matters.

It is a small and necessary bill. It is a step towards the entirely New Zealand - incorporated banking system that the Reserve Bank is very keen on, and I am pleased to support it.

I stand to support this private bill, the Westpac New Zealand Bill. There are a number of reasons why we support it. It is common-sense and absolutely necessary legislation, and Labour has always supported any sort of financial legislation that we believe improves business and Government efficiency. This bill is also important to the strength of the local banking sector. It has already been alluded to that Australasia came out of the financial crisis reasonably well, and one of the reasons we did was that we had a very strong and sound banking sector.

The bill is called the Westpac New Zealand Bill; I will just allay some people’s fears, because we had the “Warner Bros Bill”—the Employment Relations (Film Production Work) Amendment Bill—earlier this year. People may think that a bill promoted by Westpac is one of those insidious bills that is held over New Zealand by a large international corporation. In fact, it is not at all. Whereas the “Warner Bros Bill” did that, eroding sovereign rights of New Zealand, this bill is quite the opposite.

We support the bill, and the Reserve Bank supports it. We also understand that it is very important that Westpac New Zealand has very sound and stable New Zealand operations and enjoys the benefits of being linked to its trans-Tasman parent—for example, access to capital.

As mentioned, the Reserve Bank backs this bill. As I said, it is a common-sense bill, and we are very much looking forward to bringing it to the Finance and Expenditure Committee so that we can look at its provisions and hear submissions on it, just to make sure that it is nice and robust. But we are supporting it.

I will make one point that I think Westpac should be aware of, and that is that the level of transparency that New Zealanders demand of their banks is very important. Before I elaborate on that a little further, I say that last week Westpac sent its KiwiSaver team up to Wairoa to help out some distressed freezing workers who had gone without work for up to 6 months. The team did an absolutely fantastic job of providing budgeting advice, helping people apply for some of the extreme hardship provisions that are available under the KiwiSaver Act, and providing a whole lot of general information to those people in Wairoa. At this point I thank Westpac for the work it did, because it was absolutely brilliant and it was hugely appreciated by the people of Wairoa.

We all understand the importance of a sound banking system—of that there is no doubt in any quarter of this House. As I mentioned, our system held up very well, but the one thing that is most important—and I think most New Zealanders expect if not demand it—is a level of transparency and accountability. Labour tried to bring that to bear when we held our banking inquiry, because the vast majority of New Zealanders did not understand what was happening. Probably there was a very logical reason for what was happening. This was when the financial crisis was at its height. The official cash rate was quite low but the margins that the banks were making were quite high, and the vast majority of people did not understand what was going on. Labour called for a banking inquiry. It was not supported, except by the Greens, and that was hugely appreciated—

💬 Hon David Parker: And the Progressive party.

—and the Progressive party, sorry. We asked the banks to appear before us, just so they could explain in plain English what was going on, how the banks were operating, and why they were doing what they were doing. The vast majority of New Zealanders were suffering but banks were declaring hundreds of millions of dollars in profit.

That was a very good opportunity to sit down in front of ordinary New Zealanders in an open forum and get the information out there. Only one bank, Kiwibank, sat down in front of us and explained. Westpac did not, and I say to Westpac, as the Government banker, that we demand a level of accountability and responsibility, especially from the Government’s banker, and we hope that in future Westpac takes advantage of any opportunity to explain to the public its methods of operation.

We are supporting this bill, and I look forward to its going to the select committee. But also I say to Westpac that there is an element of disquiet in the country at the moment about the situation where the New Zealand chief executive of Westpac—who is earning about $5 million, I think—has just received a tax cut of about $5,000 per week, and the person who cleans his office has received a tax cut of about $5 a week, which is about 1,000 times smaller than the tax cut the chief executive is getting. A lot of New Zealanders have a level of disquiet about that situation. But this is a good bill. We support it, and I look forward to it coming before the select committee. Thank you.

I stand on behalf of the Greens to speak on the Westpac New Zealand Bill, which is a private bill coming before this House, taking House time, and using quite a lot of public money. The Greens will support this bill to go to select committee but we will not necessarily support it further until we look at it at the select committee.

Westpac is, of course, one of the oligopoly players in the New Zealand banking system. One of the things that became very clear during the Multi-party Parliamentary Banking Inquiry was that we do not have a very competitive banking market in New Zealand, aside from Kiwibank, because the four pillars of the Australian banking system are present in New Zealand. They had a cosy arrangement, at least before Kiwibank turned up, where they did not compete on price. The market was divided up and they sought to maximise their profits, which they sent back to Australia, rather than competing on price.

That arrangement was indicated in some of the evidence that was presented to us by Kiwibank at the inquiry. Those who do not really understand the banking sector—which, I suspect, includes a lot of the National members—do not realise that the banking sector worked through a cosy arrangement involving the big Australian banks, and there was no serious competition on price. That is one of the problems we have in dealing with it. Having basically let the banking sector slip into overseas ownership, we have this ongoing problem.

We also have an issue with Westpac and the big Australian banks in respect of their tax avoidance activities. On 23 December last year the big Australian banks were forced to pay back nearly $2 billion to the New Zealand taxpayer—$2 billion in taxes that they had unlawfully avoided. They were caught out by the Inland Revenue Department and lost their cases in the New Zealand High Court. The banks fought their cases as far as they could, and then, on 23 December—which, for those who do not know, is 2 days before Christmas, when most people are rather busy doing other things—the announcement was made that the banks had agreed to pay back the money, or at least some of it. They did not pay back all the money they owed, and they did not have any penalties, unlike ordinary taxpayers. No one from Westpac or from the other banks was charged with anything. None the less, they agreed to pay back a good chunk of the money that they had unlawfully avoided.

We are pretty cynical about the behaviour of Westpac and the other banks, having seen their behaviour in actively and unlawfully avoiding very, very large amounts of tax that they owed the New Zealand taxpayer. We have a slightly cynical approach towards Westpac.

Of course, because we have these foreign-owned banks we also have the problem of huge amounts of profit being transferred back overseas. The biggest part of New Zealand’s current account deficit is in the investment income deficit, and that is because of the profits that are going back to the overseas owners—largely Australian-based overseas owners—which adds significantly to the current account deficit in New Zealand.

In fact, in the middle of the global financial crisis the Australian banks were transferring more money out of New Zealand than they were actually making in profits. It is one of the untold stories of the crisis that while we were effectively subsidising the banks by providing a wholesale and retail guarantee for them, they were shovelling money back across to their owners as fast as they could, to make sure that the balance sheets back in Australia looked good. While the New Zealand taxpayers were subsidising the Australian banks, basically because we gave them cheap insurance—and they would have been in trouble had the taxpayers not provided a wholesale and retail guarantee—the banks were shovelling money back to their owners. That provided a real problem for New Zealand. During the global financial crisis, capital was extremely short, so having the banks send the money back to Australia was a big problem.

We also have an issue with Westpac and the other banks around the treatment of staff. Basically, Westpac and other banks incentivise their staff to put people into debt. They have staff incentives where staff get paid bonuses if they can convince people to add more money on to their credit cards, or to increase their credit card limits, which just creates further debt problems for New Zealanders.

The other issue specific to Westpac is around the master banking agreement. The last time the agreement was put out for open tender was when David Lange was Prime Minister; we have not had an open tender for that agreement since then. There have been some negotiations with Westpac, but it is very difficult for us to be sure that we are getting a very good deal out of Westpac when there has been no open tender agreement.

Finally, of course, there is the issue of pay. The chief executive officer of Westpac is given $5 million a year out of the pockets of Westpac customers. They ultimately have to pay that $5 million a year. I think it is grossly inequitable that someone in New Zealand is paid $5 million a year. I think that Westpac should look at itself.

Labour supports the Westpac New Zealand Bill going to the Finance and Expenditure Committee. We want to see a very strong banking sector. It is fundamental to our economy. It is also a fact of life that our banking sector is dominated by the four major Australian-owned banks. They hold more than 90 percent of the banking transaction market. It is to the credit of those Australian-owned banks that over the last few years we have seen what I suppose is more restrained lending in our nation than in other parts of the world. Members can refer to Ireland currently, where the banking sector is at the heart of the financial collapse leading to savage public funding cuts and a rescue package led by the European Union.

But the Australian-owned banks are not all covered in glory. Of course, in a number of sectors here there has been lending beyond what is appropriate, and there have been some fairly strong views voiced that the Australian-owned banks, including Westpac, were riding interest rates—and perhaps are still riding interest rates—in the wake of the losses they have sustained in the face of the global financial meltdown. That is why it was important that the Australian-owned banks, including Westpac, should have supported the Labour-Greens inquiry into the banking sector, an inquiry that was set up only because the Government refused to have a wider, officially sanctioned review of the banking sector. As we know, Westpac did not support that review, nor did any of its colleague Australian-owned banks. We do not hold that against Westpac, but it might give further thought to supporting any future reviews.

I would also like to comment on the issue of the chief executive’s salary. Frankly, it is unacceptable for the pay package of a chief executive of any institution—be it public or privately owned—when we are still in the toughest economic times in a generation, to be worth more than 100 times the value, the cost, the income of some of the staff he is representing. There is an extraordinary disparity between what the ordinary workers are receiving and what the chief executive—who, even when all due credit is paid, is on a very, very high salary package—is earning. When we consider that the average Westpac customer support worker is earning from around $45,000—that is, 124th of the package that the Westpac chief executive is receiving—we see that there is a huge disparity.

It brings to mind that questions are starting to be asked around the world about pay equity. In Britain the Tory Government, the new David Cameron - led Government, has established a review of pay equity led by none other than a fellow called Will Hutton, who is a staunch Labour supporter and well-known commentator and journalist. That review is going through some of the issues that have seen these kinds of extortionate salary levels paid to senior figures, and the disparity between those salaries and those of ordinary people earning ordinary incomes. The review is getting very wide support from some surprising figures, one of them being Michael Portillo, a former Thatcherite Cabinet Minister, who has acknowledged that when market reforms were set in place under the Thatcher administration there was an expectation that the private sector would show some restraint, that the gap between those on the top, those at the bottom, and those in the middle would not grow and grow and grow. Unfortunately, that is what we saw in Britain, and that is what we see in New Zealand today.

Labour members support this bill going to the Finance and Expenditure Committee for further review; that is appropriate. We support this legislation, but we do so in a spirit that says the Westpac chief executive needs to consider the equity of his salary package. There are issues involved there as far as many New Zealanders are concerned. Ultimately, the customer is right. Ultimately, those sorts of issues can have an impact upon the choices that consumers make in the market. I would note that other bank chief executives’ salary packages are around half the level, or thereabouts, of that enjoyed by the Westpac chief executive.

I would like to comment very briefly on one other issue in respect of Westpac. One of its major call centres is sited in my electorate of Christchurch Central. There are some question marks still about the future of that—

The ASSISTANT SPEAKER (Eric Roy): The member’s time has expired.

I will take just a short call on the Westpac New Zealand Bill. I congratulate Craig Foss on bringing it forward for its first reading, and we look forward to its going to the Finance and Expenditure Committee. I am sure that his leadership of the select committee will be invaluable as the bill is taken through it.

We look forward to all parties supporting the bill as it goes through the committee process. [Interruption] Why? Well, I think it is important that we recognise that the banking sector has been crucial to New Zealand as it traverses this very difficult economic time. It may be opportune for some of the political parties on the Opposition side to whack the banking sector around a bit for the sake of scoring easy political points, but, effectively, one of the few differences between New Zealand and those Western countries that have found these times difficult has been our strong banking sector. That banking sector is dominated by the four big Australian banks, and those banks have been invaluable in providing New Zealand with economic safety during these very troubled times.

I think that if we can engage in something that will assist that banking sector, then that is important and is in the best interests of New Zealanders and of the economy as a whole. That is why it is important that all parties support this bill. The focus is not purely on just one of the banks; this bill is about Westpac, of course, but we want to make sure we also look after the other three big banks, which have also provided a lot of security to this country over the last couple of years. It is unfortunate that members of the Opposition have used this bill to talk about management policies within Westpac, rather than actually looking at the bill, which has nothing to do with the chief executive’s employment.

💬 Iain Lees-Galloway: You would never do that, would you, David?

No, we would never do that, because we would stick to the nature of the bill, unlike parties over there, which are there just for political point-scoring, and not for genuinely attempting to make this country better. That is something that that new member will learn—that Labour is not here to give genuine help to New Zealanders. He has been here about 5 minutes and thinks he can tell us what Labour actually would do. We have seen Labour members operate in good and bad times, and they do not care about New Zealand. They never have and never will. It is all about themselves, and this debate is just another example. They have gone after the chief executive rather than supporting a bill that would promote a company that has been invaluable in helping us getting through the recession.

It is very important that all parties support the bill, and I think that as it goes through the select committee process we will see that they do support it. It is interesting that the Green Party is represented on the select committee, and I am sure that Russel will take an active interest in this bill and be constructive in the way that the issue is dealt with. Labour members on the committee may focus on the wording of reports rather than the actual nature of the bill, but that is the nature of how they operate.

In essence, this bill is important for the Westpac bank to retain its ability to operate and function in a way that supports the New Zealand economy. We look forward to it going through this House in a very successful manner. It will be in the best interests of New Zealand, and that is something Labour members are yet to work out. They will take some time to do so, because they are not thinking along those lines. Thank you.

It is somewhat ironic to be able to stand and do a bill about Westpac—

💬 Hon Darren Hughes: It’s your bill?

—talk about a bill on Westpac—sorry, Mr Hughes. This bill has been brought to the House by Craig Foss, the wonderful member from Tukituki.

Westpac was my first bank, and I vividly remember, as a 7-year-old, going to New Brighton and opening up my first bank account with Westpac. It was not called Westpac at that stage; it was actually called Trust Bank Canterbury. I raise that because it relates to a really interesting aspect of the reason for this bill having to be brought before the House. Westpac bought out Trust Bank Canterbury, as some other members may recall. Trust Bank Canterbury was the dominant bank in Christchurch and in the wider South Island. All of the assets that were purchased as part of the acquisition of Trust Bank Canterbury ended up going into what was called the Westpac Banking Corporation branch, which actually was a branch of the Australian operation, not a stand-alone entity. At the time people thought “Well, so what?”. The big, key aspect of that was that the depositors and investors in Trust Bank Canterbury went from being investors in a direct subsidiary of a New Zealand entity—that is, it was regulated by the Reserve Bank of New Zealand—to being investors in a branch entity, over which the Reserve Bank had less control. The bill we have before us actually fixes that, and I think that is a good step.

Westpac has been in New Zealand for a long time. As I say, the personal history of my banking relationship with them has been an interesting one. But the bank has been a good customer and operator in New Zealand. Westpac has been very good in terms of the recent earthquake in Canterbury, and has worked very well with the locals there. That is a good indication of how well Westpac operates within our wider financial community. But this bill actually makes some improvements. As we have seen, there are some issues, potentially, with it operating as a branch of an Australian bank, rather than as a subsidiary that is fully regulated by the Reserve Bank. This legislation provides a bit more surety to the customers of Westpac out there that their own assets or liabilities—depending on whether they have mortgages or deposits—will have greater regulatory cover by the Reserve Bank. There has been a little bit of uncertainty about that, but now there are no fears or concerns. This bill is a good bit of tidying up to fix that potential anomaly that might have existed. New Zealand has a very strong banking system, and Westpac is one of the stronger players in that banking system. I understand that Westpac is one of the top 100 banks in the world, and it has come through the global financial crisis in a very, very strong fashion, as, indeed, all of the New Zealand banks have done.

The bill has some slightly unusual aspects, and I think it will be interesting to analyse them when the bill comes before the Finance and Expenditure Committee. I will quickly touch on some of those aspects. Being a member of the committee, I am sure we will spend some time looking at some of these aspects. In particular, we will look at what is known as the liabilities cap. Not only are these assets and liabilities transferring to this new subsidiary but a cap exists. Not everything is transferring; a $15 billion liability cap is being put in place as part of the transfer. Some people might ask whether that is enough. That will be one of the interesting things we look at very carefully, as part of the select committee process. Is it enough? Is the cover adequate for those with deposits or mortgages with Westpac, for those who have banked with Westpac in some way, as my children and I do? Will the Reserve Bank be able to regulate and control the new subsidiary in the best way? Should that cap be lower or higher? At this stage we do not really have a view on that matter, and it is one of the interesting things I am sure we will look at in depth, as part of that process.

You see, the Reserve Bank has been working with Westpac over a number of years to work out what the options are in relation to local incorporation. I know there has been a lot of discussion in the media about some of the other issues that it has dealt with, such as other parts of its operations being brought into New Zealand, and, in the very unusual case that we have a problem with the bank, the Reserve Bank actually having some regulatory oversight. I know that Westpac has been very good at working closely with the Reserve Bank to meet its requirements, and to satisfy the Reserve Bank that, under our New Zealand regulatory requirements—it operates under Australian regulatory requirements—it operates well and within the law, and that the Reserve Bank will be very happy with it.

I think one other aspect that members have not touched on so far is the neat things that Westpac does in the wider community. Some of those things have carried on for years and years. One activity I was particularly touched by, when doing some research on this bill, is called the Care for our Coast clean-up.

I take just a few moments to acknowledge those who have spoken on the Westpac New Zealand Bill. As far as I understand, there is general support for it around the House. I acknowledge various party leaders and finance spokespeople who have been engaged in discussions about this bill prior to its formally coming to the House. We have ensured a pretty smooth take-off, I think, for the bill. I expect a pretty good process at the Finance and Expenditure Committee. Members will examine whatever issues need to be examined. I also acknowledge the Hon Marian Hobbs, who actually introduced the first Westpac bill in 2006.

I could get quite used to this, actually. This is the first bill in my name that I have introduced to the House, so I appreciate the kind comments from colleagues around and across the House. When eminently sensible matters like this come before the House—they are not political; they are just regulatory and make for better banking practice in New Zealand—it is good to see Parliament getting together like this. Thank you.

Bill read a first time.

I move, That the Finance and Expenditure Committee consider the Westpac New Zealand Bill and that the committee report finally to the House on or before 8 April 2011.

Motion agreed to.