Deposit Takers Bill

I present a legislative statement on the Deposit Takers Bill.

DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon GRANT ROBERTSON: I move, That the Deposit Takers Bill be now read a third time.

This piece of legislation is the third in the trilogy that emerged out of the Reserve Bank Act review—the first of those widened the objectives of the bank and changed its decision-making processes to be a more modern form of monetary policy decision making; the second of those dealt with the institutional arrangements of the Reserve Bank. This, the third bill, deals with the modernisation of legislation for arrangements for deposit takers—in other words, banks and non-bank deposit takers, such as credit unions, building societies, and retail funded finance companies.

Can I, at the outset of this contribution, thank everybody who has been involved in what has been a very, very long piece of work. This is a piece of work that began as far back as the end of 2017 and beginning of 2018 when our Government came into office and we set about the Reserve Bank Act review. At that time, it was clear that it was a very big undertaking and that it needed to be split apart—as is being done at the moment, with the third of these three bills. At that time consultation began—and I want to thank everybody who has been involved in that consultation within the broader finance sector and indeed the wider community. I want to especially thank the officials from both the Reserve Bank and the Treasury who have been heavily involved in the drafting work and the redrafting work.

And I do, as I did in earlier reading, want to especially thank the Finance and Expenditure Committee, who I believe did excellent work to improve the quality of this bill, and I know that members of that committee will get a chance to talk about that in the coming calls on this bill. In particular—and I do just want to briefly mention this again—the work that was done to alter clause 3 and clause 4 of the bill around the purposes and the principles, in addition to the vitally important and core purpose of the legislation: to ensure we have a stable financial system, that we also ensure that the system has diversity, and that the management of it, the supervision of it, has proportionality. So those principles around stability, diversity, and proportionality now feed through in a coherent way in clauses 3 and 4 of the bill as a result of what the select committee did, and I think that is a really good example of how a select committee can add value to the legislation and can reflect the views of submitters, because we do want a diverse deposit-taking sector that provides to depositors a range of options that are in line with their lives and their circumstances. Equally, we want those to be institutions that are stable and strong and that we can have confidence in, and I think what the select committee did in those changes is indeed quite significant.

We’ve dealt with, in other readings, some of the core provisions of this: particularly around the modernisation of licensing, supervision, and enforcement. These are serious powers—and this came up during the committee of the whole House stage a couple of times—these are serious powers that the Reserve Bank has, but they’re important ones, because New Zealanders need to know, if they’ve got money in a bank, credit union, or building society, that that institution is strong, stable, well-governed, and behaving in line with the law. Unfortunately, in our history, New Zealanders have had examples where that hasn’t happened, and in those examples that has caused significant financial distress to a wide range of New Zealanders.

This bill makes a strong attempt to create a modernised and rigorous regime, and as I’ve said in a couple of the other, earlier readings of this, earlier in the year, when we saw Silicon Valley Bank—signature bank in the US—New Zealanders rightly raised their eyebrows and said “Could that happen to us?” The thing I can say to New Zealanders is our banking system is more robust and rigorous in how a bank is established. It is more robust and rigorous in that jurisdiction, as it is too in these supervision and in these licensing and enforcement regimes that are covered in this bill. So New Zealanders can have confidence in the system we have, but its legislation that gives them that confidence and underpins it.

In the remaining time I’m going to take today, I want to talk about what is being created under this legislation, and that is the new depositor compensation scheme. And this is a red-letter day; this is something that has been discussed for years in New Zealand, about whether or not we should do as most other countries do and have some kind of standing scheme for the time when the very, very worst happens and people’s deposits are at risk. Now, I know—and we all know—what happens when you don’t have that scheme: you have an ad hoc response. Invariably, it is the Government that people turn to and say “Well, can you help us out in this situation?” I vividly recall my first election campaign; we had Mr Simpson talking about his. It was Mr Woodhouse’s first election campaign as well in 2008, when in the middle of that, we were faced with these issues. I can recall being at the Labour Party’s launch of its campaign, and Michael Cullen was off to the side of the stage, on his phone, working out what to do in the face of a potential collapse and run. So these are real issues. They don’t happen very often, because our banking system is stable and our financial system is stable, but when they do happen, we want New Zealanders to have confidence that they will be looked after.

So today, when we pass this legislation, we will create that depositor compensation scheme. We’ve again—over the course of that consultation—made improvements in how that scheme is going to operate. We started out with a protection limit of $50,000 for a deposit. We consulted, and out of that consultation it emerged that that wasn’t going to cover enough New Zealanders, so we increased it to $100,000. That means that 93 percent of depositors are covered, and I think, of actual deposits—obviously that number is a bit different, because that missing 7 percent have quite large deposits. But that’s $100,000 in each bank, or in each institution—so if people have spread their money out, they would be covered in the event that it would happen in another institution. So that gives New Zealanders that basic assurance that their money is going to be looked after if the worst thing happens.

What happens from here: when the legislation passes today, the Reserve Bank and the Treasury will enter into a period of consultation around the funding strategy and the levy framework. So yes, this will be levy funded: the levy will be on those deposit takers, and the funding framework for that will need to make sure that the scheme is able to fund itself—and when it does have to pay out, it’s able to manage itself. When we look internationally, this can be done with a fairly modest levy on those institutions, and I hope those institutions will see that as part of their responsibility to be part of a banking system. Invariably, some costs may be passed on to those who are putting their money into the bank, but we hope that banks will be absorb as much of this as possible as part of their licence, as it were—a social one, in this case—to operate in New Zealand. So the piece of work that will take place over the next months will get us to the point that the scheme can be operational in 2024. That will be an important day for New Zealanders to know that that scheme and that backstop is there, and I’m very proud of our Government for having addressed a longstanding issue; a longstanding absence in our framework of the way that we ensure that New Zealanders’ money is looked after, and I look forward to the deposit compensation scheme coming into force.

With that, I am proud of the fact that we have now completed three bits of legislation as a result of the Reserve Bank of New Zealand review. We have a modernised bank; we have a system that is designed for confidence in our financial system and confidence in the way monetary policy is created. This bill contributes strongly to that. I again thank everybody who has contributed to it, and I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. Can I begin by joining with the Minister of Finance in his thanks to everybody who’s been involved in this. As he said, it’s been a long journey of over five years. In fact, it’s straddled virtually the term of this Government. I hope it’ll bookend it, but that’ll be over to others.

I was an interloper on the Finance and Expenditure Committee over the last few months and, as a consequence, I’m sure members of that committee will agree that this is a notoriously complex piece of legislation to get one’s head around, and for that reason we needed to rely very heavily on officials and the experts that were advising the committee. I think they did an excellent job in advising the committee, but so too did the committee do a good job in taking that advice and turning the bill into a better shape. It came in in reasonably good shape; it’s come out of that process in better shape.

It’s interesting to reflect on the fact that when it came in, the winds of change have blown since then. Barbara Edmonds was the chair of the committee; she’s now the Hon Barbara Edmonds, Minister for Economic Development; Ingrid Leary, a member of that committee, is now the chair of the committee. The bill will get Royal assent tomorrow but many parts of it aren’t going to come in for potentially months and in some cases automatically after four years if certain things haven’t happened. There’s every likelihood that we’ll have a new Minister of Finance in that time, maybe a new Minister of Economic Development—well, definitely a new Minister of Economic Development if we get a new Minister of Finance. The point is that the sorts of banking and Reserve Bank monetary policy legislation does need to endure across administrations. It’s important that legislation like this does have broad support across the House, because if there is strong opposition to the things that the Government of the day is doing and we continue to yoyo from a policy perspective across Governments with this important fiscal and monetary in particular—monetary policy framework—then that is not good for banking stability.

I’m pleased to note that, actually, in our history by and large, certainly in the last 30 or 40 years, we’ve had that. Now, that’s got some caveats in it, I think, as the Minister said. This is the trifecta. The first two bills did have some things that we had some serious concerns about to the degree that it may have been undermining the independence of the Reserve Bank and allowing the Minister of Finance to have perhaps a little more hands on influence than was appropriate. And time will tell whether or not that manifests, but overall, with those caveats, there is broad support. Indeed, the National Party will continue to support the Deposit Takers Bill at third reading.

The Minister has talked about one of the significant changes that will be brought in by this, and that is the introduction of the depositor compensation scheme, effectively. And this is a really interesting issue. I don’t call it a red-letter day, I think it’s probably slightly hyperbolic to describe it as that, because there is the risk, as had been kicked around by the select committee, of the moral hazard that comes with such a scheme. Indeed, with any investment, whether it’s cash deposits, equities, bonds, buildings, there is always a reasonably high correlation between risk and return. So for those people who are prepared to seek a higher return, the corollary is that there will be a higher risk, and it’s of interest to me to see whether or not this will change behaviour in the retail deposit market once the depositor compensation scheme comes up. It is a caveat, it’s not an opposition to it.

I think the other thing that is a bit of a caveat to me in this is the number and extent of powers that are being given to the Reserve Bank during a crisis. It’s really important to imagine what—it’s all very well to pass legislation in times of relative stability in our banking system, but that can be upset. Indeed, Mr Robertson and I did experience that. His Minister of Finance at the time, the late Sir Michael Cullen, was required to put in place the retail deposit guarantee scheme, which the Hon Bill English enhanced and then had to call upon with the collapse of South Canterbury Finance. When that occurred, I was a backbencher. By the time that was being mopped up, I was in Cabinet.

That was a particularly challenging period both for the country and for the Government to negotiate through that period. But the powers that are being given through this bill are quite strong: the powers to suspend debt payments, to negotiate with creditors, to suspend deposit repayments and cancel liabilities to creditors, converting unsecured liabilities to equity. These are quite strong powers. Frankly, if I was a depositor in a bank or a non-bank organisation that was on the brink of collapse, converting my cash into a share is probably not something that I would be particularly enamoured towards. So these are quite broad powers that I hope we don’t test for a very long time, if ever.

The other thing also that has troubled us to some degree is the extent to which the reach of regulation balances that risk with efficiency in the bank and non-bank market. Now, I don’t think that risk is as high as some of the other concerns I have, but it is real that every time we put in place a levy or a requirement, ultimately the costs of that fall on the customer. It’s too easy to say, “Well, the banks make billions of dollars and therefore they can pay.” The fact is they do, but they also have an enormous capital base, and rates of return on capital are not nearly as extravagant as some in the media or in the Government might have thought. Ironically, we’re having a banking inquiry commencing at the moment on the basis not that our banks are at risk, but that our banks are so strong they could be making hyper-profits.

And this is one of the problems with what I call commodity products. If one thinks of things like petrol or cash, in this case, a deposit interest rate, or milk or anything that’s pretty generic if you like—we try and dress them up as different—what happens is that pure competition and pure collusion look almost exactly the same. It’s really hard to tell one from the other. If when returning to Dunedin, Dr Clark drives along Kaikorai Valley Road and there is at that time a price increase in petrol, he’ll notice that all four of the service stations along that road will increase or decrease their prices at the pump at the same time, almost. Now, does one suspect collusion? I don’t. I know that’s because of competition, but it’s really hard to tell the difference. And I think the banking inquiry will sort of run into this challenge that actually the banks that we have are strong and rightly so—we want a strong banking system—but they’re also highly competitive. I hope that the introduction and passing of this legislation doesn’t have the opposite effect of what we want, and that is to reduce the number of players in the market at just the same time as we want to actually increase competition in our banking sector.

The other thing about efficiency—and I see Dr Clark nodding. Although this is a criticism, we do sometimes pass well-intended legislation that has unintended consequences. It’s a score draw in that respect with, I think, the previous Government having passed anti - money laundering legislation that ended up being very, very unwieldy, and I think needs streamlining and simplifying, so too the Credit Contracts and Consumer Finance Act has probably burdened stakeholders to a much greater degree than I think the Minister or the Government anticipated, and there’s still, in my view, some work to do there. I hope we don’t add the Deposit Takers Act to that list of well-meaning but unwieldy pieces of legislation. The good thing, I guess, is that if we do have broad support across the House for the monetary policy framework that we have in our legislation, if there are things that need to be improved in the future, we can. But with that, I have pleasure in confirming that the National Party will continue to support this bill at third reading.

I’d just like to pick up on a couple of points made by the Minister Grant Robertson in the previous contribution around the flexibility, proportionality, and competition, because in fact the issues that the Hon Michael Woodhouse raised around the need for flexibility and proportionality, so that smaller players and a diversity of players in the market can thrive, are exactly the reason that the Finance and Expenditure Committee did make those fairly significant changes both around access to the financial system in terms of the purpose but more particularly around diversity and diversity of provider and diversity of people accessing the players in the market. Because it was our view that this type of more nuanced approach to regulation would ultimately lead to greater competition and that, in turn would lead to more stability.

So it’s interesting that one of the debates we had in the select committee was when we looked at including those elements, there seemed to be an assumption at times from various people that the stability of the financial system and the elements of diversity and access were mutually exclusive, where in fact some of us believe that they do go in the same direction very much for those competition reasons that I’ve just stated. Nevertheless, there is a backstop in the legislation to ensure that if they are at odds with each other it is stability of the financial system that will take primacy.

The other thing I’d just like to raise is around what will happen now with the standards. The Minister mentioned what would happen henceforth. The conditions of regulation will now be replaced by standards under the Legislation Act 2019, and that means that the work that the Reserve Bank does will go before the Regulations Review Committee. But also the Reserve Bank has undertaken to come back to the Finance and Expenditure Committee, whether under this Parliament or much more likely the next, and we just all wanted that in the Hansard to ensure that they do that, because a lot of the devil will be in the detail, and the proportionality and the functioning of those standards will be really important. We are aware that the Reserve Bank is in effect writing its own rules, so that oversight will be critical. With that, I commend the bill to the House.

Thank you, Mr Speaker. I’m happy to support this bill, and, as the chair of the Regulations Review Committee, I of course look forward to—

Hon Rachel Brooking: Oh, a great committee—great committee.

Hon JUDITH COLLINS: It is a great speech, thank you.

Hon Rachel Brooking: It’s a great committee—great committee.

Hon JUDITH COLLINS: A great committee—yes, it is that too, and we have a lot of cross-party support for everything on the committee, normally. The reason that it does need to actually look at all these regulations coming through, and particularly those of the Reserve Bank coming through—and I see Helen White, the deputy chair of the committee here, nodding away, agreeing with me, which is a very good thing to do.

What we see on that committee, though, from time to time—in fact, quite frequently—is that not every entity whose regulations that we review, and particularly not some Government entities, take the whole process as seriously as we would like them to. So I can assure the Reserve Bank—who, I am sure, is listening somewhere—that we will take a very careful look at their regulations, and particularly at any complaints that we have. We’re very ably assisted on the Regulations Review Committee by the particularly capable officials that we have working with us from parliamentary counsel, legislative counsel, who are, I find, just a delight to work with and very professional.

It is good to have this sort of legislation coming through where we have cross-party support. I think this is the sort of thing that the public would expect us to do. It is, essentially, an insurance scheme for depositors, and I think it can—if it works as intended—work as an opportunity to enable other deposit takers to be able to at least compete in some way with the big four Australian-owned banks, which, as we know, are incredibly powerful in the market. They take up about 85 percent of deposits.

It’s very good to have such big players in the market because of the stability of the Australian economy and the strength of it, but the problem is that, as has been said to me from time to time, they’re always there with an umbrella when the sun is shining, but they’re not always there with the umbrella once the rain starts. I think that that is true, particularly for those people involved in things like property development that have found it very hard to get any funding lines at all at the moment, yet they were there only a few years ago. I think too that we’re seeing those banks move very much towards models that mean that they don’t always finance the industries or sectors that they have in the past because of perceptions around whether or not, they’re, essentially, politically correct to do so. I think that’s a real shame, and that’s why we need to actually have to give a little bit of help to some of those financial institutions and deposit takers to give them a little bit of an even playing field when it comes to being able to take people’s deposits.

There is a limit, obviously, to compensation of $100,000 per person per institution or deposit taker, so it’s not a blank cheque. Hopefully, we won’t need to use it, but the fact is that we most likely will at some stage, because one of the upshots of the results from the global financial crisis in 2007 to probably 2010 was that a lot of the mezzanine financing that used to be available for people in business and, particularly, development suddenly was no longer there, and so that left them very much at the mercy of the big banks.

Certainly, when I first started practising law, we used to have solicitors’ nominee companies that used to be involved in a lot of lending to developers and others being able to have different terms from banks, but always at higher interest rates because higher risk brings higher interest rates. Those have all mostly disappeared because of the liability for the partners in those law firms if something went wrong, and also the reputational risk as well as the personal risk of having to pay out of their own money as partners in a law firm should they lose money or where there’s been some sort of fraud or something like that by a staff member.

So these are all the things that have happened over the years that actually tightened the screws on the ability of people to access financing. It really does mean that when you’re looking at, say, innovation, for instance, or technology areas, it’s very, very hard for anybody to get any funding at the moment from those areas, and I think there’s a real opportunity here for some people involved in the deposit taking and finance areas to look at opportunities for them to be involved in that sort of financing.

But it’s pretty hard, and I just think it’s like one of those things where sometimes we put a lot of regulations and rules in where we’re trying to protect everybody, and I think that’s one of the things we found with the—what was it called again?—the CCCFA, or the Credit Contracts and Consumer Finance Act. It ended up with banks turning down people to get home loans because of the numbers of flat whites they had had that day or something—for spending too much, they thought, on coffees. It was ridiculous behaviour, given that, actually, people can adjust their own behaviours. When they’ve got a mortgage to pay as opposed to rent to pay, they can make those decisions. But that sort of nanny State-ism and trying to protect people can actually end up keeping people away from the opportunity to better their own situation and to build their own assets.

So I think you always have to be very careful with this, and this is one of the reasons I think this seems to me to be a reasonable response to a situation. I think with the Reserve Bank too, we’ll be taking a very clear look at just how that is being used.

But the other thing is we need to always be aware, as we perhaps were on the CCCFA, that sometimes you just have to come back to Parliament—or we have to come back to Parliament—and change the rules if they’re not working in accordance with the way that we anticipate them to do, because whatever we anticipate may not be the way they work. I agree with the Hon Michael Woodhouse that the Anti-Money Laundering and Countering Financing of Terrorism Act, which I actually had to be the poor Minister to bring it through, finally—what a dreadful piece of legislation. Basically, the European Union was making it really clear that if we didn’t do it, our banks weren’t going to be able to operate in the EU.

That’s what happens when you’re part of the international world—you know, in the world, you have to actually do these things. But that doesn’t mean to say we can’t come back to it and say, “How is this holding back businesses, how is it leading to less productivity, and how is it adding more cost?” We should always be open to review, because if every piece of legislation was going to be perfect from now until the foreseeable future, then why would we ever come back with amendments? The fact is that every piece of legislation should be able to be looked to say: is it bringing out behaviours that we expect it to do and is it working well, and, if not, then how can we make that change that is obviously necessary? I think that’s what we need to be open to.

So if this piece of legislation doesn’t work out in the way we think it will, we’ll have to come back with an amendment. But I hope that it does work and I hope that we end up with some more competition in the deposit takers sector, but I also hope that we always say to people that they should understand that where there is more risk, there’ll be more interest, and where there is more interest, there’ll be more risk. That’s not a golden rule, but if something sounds too good to be true, it most likely is.

It’s a delight to speak on the Deposit Takers Bill, which I’ve interacted with at various points in various guises over many years, and it’s interesting to hear other members’ reflect on their connections with it through its long passage through the policy and parliamentary stages.

I do want to just draw a couple of points that Ingrid Leary, the member for Taieri, has touched on around the proportionality framework—I really support her comments. And I also note the fantastic influence of Dunedin members on this bill—we’ll claim Grant Robertson back—of course, Rachel Brooking and Ingrid Leary both chairing the Finance and Expenditure Committee (FEC), and the Hon Michael Woodhouse making contributions, as you heard earlier. There’s some really good Dunedin input into this bill, and I think it’s the better for it.

So the bill, as we’ve heard, does some really important things: setting clear objectives for the new deposit taker regime; it sets out the licensing process for deposit takers; it provides the Reserve Bank with power to set standards for deposit takers, it might be capital requirements or liquidity requirements; and it also expands the ability of the Reserve Bank to supervise and enforce the provisions in the deposit takers regime. And of course, much of the debate has focused around or commented on the deposit compensation scheme of up to $100,000 per deposit and per institution. All of those things were a real response to the International Monetary Fund’s review of the New Zealand financial sector regulation in 2016-17. So it’s got a good pedigree and achieves things that we would want to see to make our banking sector more stable.

But I wanted to just note the proportionality framework that is going to be developed by the Reserve Bank and the fact that they’ve committed to bringing that back in its draft form to receive some feedback from the FEC, probably in the next Parliament.

Just for context, we know that registered banks account for $650 billion in assets in the New Zealand market, whereas the non-bank deposit taking sector accounts for just over $3 billion—it’s a really big difference. Members of that committee felt it incredibly important that the regime really looked at where the risk was and responded in a proportionate fashion.

I do again congratulate the members the Hon Rachel Brooking and Ingrid Leary—both Dunedin colleagues—for their input into this bill and the overseeing of these changes that have, I think, made the bill stronger and better and, hopefully, more responsive to the needs of New Zealanders. I commend the bill to the House.

Look, the ACT Party won’t be supporting the Deposit Takers Bill. Damien Smith, our representative on the Finance and Expenditure Committee, has made it clear that ACT is very, very concerned about the moral hazard that a Government underwriting depositors may create. I just want to refresh the memory of the House on what ACT’s primary concerns are—a depositor and a deposit taker isolated from the consequences of risky behaviour, which could increase its occurrence.

Evidence from overseas is that deposit insurance only increases the risk because depositors feel that they don’t need to pay as much careful attention to the nature of the investments that they’re putting their money into, because it creates the sense that, well, the Government will take care of us, the Government will sort it out, the Government will bail out the bank or the non-bank deposit taker.

What is a much more important factor in preventing runs on banks where depositors might lose their investments is a strong, credible financial institution, and New Zealand is very fortunate that our four main trading banks are anchored in our neighbouring country, Australia, where they have enormous balance sheets and where they have extensive investments in hard assets, including minerals and resources, to underpin the solvency of their banks.

New Zealand is a relatively small market with only 5 million people, only 3 million who work, and not all of those are net taxpayers. And yet, the cost of deposit takers’ insurance is going to fall primarily on the Crown. It’s going to require an expansion of Reserve Bank powers, and it’s also going to be funded by levies on deposit takers, which means an increase in cost and a reduction in return.

Hon Dr David Clark: Not the Crown.

SIMON COURT: Well, the Hon David Clark says “not the Crown”, but the entire sense that the bill has created—

Hon Dr David Clark: The sense! The vibe!

SIMON COURT: —the vibe—is that the Crown is on the hook, that the Government will take care of you. That’s the moral hazard.

ACT believes that strong, credible financial institutions, especially a credible Reserve Bank and a credible Governor of the Reserve Bank, are far more important to ensure that deposit takers and depositors feel confident and are protected than this legislation. That is why ACT would reform the Reserve Bank of New Zealand Act to ensure that the board has appointees that are credible economists with significant financial governance experience. It turns out that the Reserve Bank has been recruiting people and it says explicitly in the recruitment advertisements: no economics experience or qualifications required. So if anything is going to undermine the confidence in our banking depositors and deposit taking institutions, it’s having the sector administered by people who are not in fact economists and don’t have any financial experience. That’s why ACT would reform the Reserve Bank of New Zealand Act.

So ACT will not be supporting this bill, but we look forward, should there be a change of Government, to opening up the discussion again and delivering a far better outcome for New Zealand borrowers and New Zealand investors.

Tēnā koe, Madam Speaker. Tēnā koutou e te Whare. I’m just going to take a short call on this bill. As I said in my second reading speech on the bill, this bill will finally implement something that the Green Party has called for since 2013, at least—so over 10 years. At that time, Russel Norman was our co-leader and finance spokesperson, and made the point that this type of scheme would be similar to an Australian type of scheme. Far from what the previous speaker said, it’s not actually falling on the Crown. It’s ensuring that ordinary people don’t lose their savings up to $100,000. Their savings are protected in the case of financial insolvency, or a collapse in the financial sector. It ensures that the funds that are available for that are paid by the institutions themselves.

Of course, those institutions, especially the four largest banks operating in New Zealand, which are not owned in New Zealand, have been excessively profitable for many, many years. This is a sector that cannot fail, it is too big to fail, and takes excess profit and takes—essentially a, kind of, I would say, tax in the way that the parties on the right use the word tax. Like it’s money that New Zealanders are paying, but rather than it going towards public services or public goods that benefit New Zealanders, it’s going to the private shareholders of the banks, and that’s not particularly good for the economy, it’s not good for our people—

Simon Court: It kind of is because then they keep lending us money. I mean that’s the point isn’t it?

Hon JULIE ANNE GENTER: My colleague to the right seems to think that the banks are the ones who are responsible for the society and the good that we have, these private shareholders. And yet, the banks are institutions that exist because of rules made up by people, and at the moment those rules are enabling those shareholders to make excess profit, to make lots and lots of money at the expense of New Zealanders, and, you know, at the expense of the environment in some cases. It’s one thing for something to be sustainable, but it’s quite another for it to take in excess profit. So those are things that are quite clearly defined in the field of economics. I say to my colleague, who I don’t believe has an economics degree, who was previously complaining about people who don’t have an economics study commenting on such things—quite the irony.

Anyway. Look, the bill is good. It’s brought in the deposit guarantee scheme that we’ve been calling for over 10 years. It’s great that the two largest parties are supporting that. I guess it takes about 10 years for National and Labour to catch up with the Green Party, but that’s fine. We’ll almost be able to make it on climate change since they now admit that climate change exists. Maybe in 10 years they’ll support policies that actually take action on climate change. That would be good.

In terms of the changes that were made during the select committee process, while I wasn’t on the select committee, I was happy to see that there was special consideration given to non-bank deposit takers. I laud the role of credit unions and other types of societies that provide really important access to finance for communities, and the Green Party would like to see a much bigger role for them in our society so that people have access to finance and financial services without having to pay the extra for, you know, the big Aussie-based banks for their senior executives and their board members to have lavish lifestyles on their lavish salaries. For their shareholders to get excessive returns while people are struggling with a cost of living crisis here in New Zealand—struggling with rising interest rates, rising food prices, which are related to rising interest rates. The point is all of these rules are made up by people and we can change them so they work for people and the environment, and let’s do that. That’s what the Green Party wants to do.

I’m going to make a very short contribution. I think I will just go to two points. One, I absolutely agree that the small cooperatives and non-bank depositors have really had their interests protected in this in a way that was the result of the work and the thought of the select committee. What came to us didn’t really have that kind of accommodation and what left did. I think that’s a really good thing, because I belong to one of those, and I think that they’re a very good part of our market.

The other point I wanted to make was that this idea of securing deposits has been around for a long time. In fact, in America, they’ve had it since 1933. It has been one of the things that’s made their system more stable at times. I don’t think it was the Greens’ idea; I think it’s a general principle and it’s a good one and it stabilises things. I reject the idea that there’s a moral hazard in doing it. It makes good sense. I commend this bill to the House.

Look, I look forward to adding a few comments to the top drawer contributions that we’ve had this afternoon on this bill. I appreciate the contribution of Simon Court, bringing in one of the greatest movies, actually, of all time—The Castle—talking about the fact that he didn’t really “get the vibe” of the thing. Well, mate, that speech of yours “is going straight to the pool room”—straight to the pool room! It was—

Hon Phil Twyford: Tell him he’s dreaming.

TODD MULLER: Yes, exactly—he is dreaming. But frankly, I agree with the comments that have been made. This is not a moral hazard at all; this is sensible legislation, and National and Labour, have actually, you know, collectively worked through it to get it to a good place.

I acknowledge the Greens’ contribution by Julie Anne Genter. She is right—every one-in-a-hundred of their ideas is actually worth reflecting on and putting in some legislation. So she is right that the National Party does see merit in this, but I wouldn’t get her hopes up that it’s going to occur again any time soon.

It’s had a very good select committee process. You heard that from the contributions of the members across both sides of the House who have been involved in this bill from its inception. The contributions from submitters were insightful and saw a number of sensible changes that we support.

We think this actually strikes the right balance between contributing to a stable and efficient financial system, on the one hand, without being overly burdensome on deposit takers. I think it does strike the right balance, we support it, and it’s a piece of legislation that we hope can quickly progress this afternoon.

I would like to commend the previous speaker, Todd Muller, and I want this to move through quickly as well, as it’s good legislation. Therefore, I commend this bill to the House.

Hon Phil Twyford: Madam Speaker.

The question is that motion be agreed to—

Hon Phil Twyford: Madam Speaker.

ASSISTANT SPEAKER (Hon Poto Williams): Oh, we have another—I apologise, Mr Twyford. I call the Hon Phil Twyford.

Unaccustomed as I am, Madam Speaker—a very brief call. I just wanted to say a couple of things. One is just to credit the Hon Grant Robertson for stewarding through this triptych of Reserve Bank reform legislation that modernises one of our most important institutions. This bill is all about the financial stability and the resilience of the system and there’s been some very good work done through these three bits of law.

Secondly, just to really note that when there are bank runs, when there are financial crises, as there are under capitalism—think to think about the 1997 Asian financial crisis, think about the global financial crisis, the great crash of 1929 is the one in our folk memory—Governments generally are quick to bail out the banks to buy some stability, but generally what happens is that it’s ordinary people who lose their shirts. Ordinary people are the ones who suffer, whose living standards get hammered and assets get devalued when there are big financial crises.

What’s good about this bill is that at the heart of it is this deposit insurance scheme, which will provide some backup, some confidence, some reassurance to depositors and, in doing so, actually inject some confidence and stability into the system as a whole. So it’s well worthwhile. And I commend this bill to the House.

Thank you, Madam Speaker. Yes, everyone is in support that needs to be to get the Deposit Takers Bill through, so well done to the members of the Finance and Expenditure Committee and to those that have worked on this bill.

The financial arrangements in New Zealand become more acute when there are difficult times, as we are experiencing at the moment, so people take a greater interest in what their position is at these particular times. To ensure that deposit takers have got some security will be something that they will no doubt be very satisfied to see, and to give them that comfort at this time. They’re also getting reasonably good interest rates at the moment so they should be doubly happy with their position in the banking sector.

One of the big things about the banking sector at the moment, though, is the role of the Reserve Bank, and they have had sustained criticism from this side and for good reason. The Reserve Bank simply got it wrong in regards to COVID and interest rates in the last few months, leading to the last couple of years. Their failure, in many regards, needs the sunlight of this House to really look at it, because if you’re looking at the interest rates—and deposit takers are experiencing high interest rates at the moment—the other side of that is that borrowers are experiencing very high interest rates, and the impact of that on our economy is huge. The role of the Reserve Bank in managing the economy has been something that many people have been disappointed in in the last few years.

It’s all right us passing legislation like this to try and protect deposit takers, but the reality is that the Reserve Bank has a bigger role in actually looking after the economic fundamentals of our banking system and setting interest rates effectively. That is the most important thing in the banking sector—the setting of interest rates and the security available.

We support the bill, but we have some concerns around the role that the Reserve Bank has played in the last couple of years. A deposit taker’s guarantee is nice, but a Reserve Bank that actually manages the financial affairs of the country better would be of much more financial support to the New Zealand economy at this time.

Kia ora, Madam Speaker. It is a pleasure to rise and take the final call on the Deposit Takers Bill. I do despair as somebody’s who’s obviously had a colleague in the education system who’s failed to teach basic economics to some members in this House. The idea that the sky is falling, there’s moral hazard, and there’s magnificent risk if we pursue this legislation is interesting, given that we were only one of two countries in the OECD that has yet to undertake such a piece of work. So a bit confused there.

But, anyway, as we’ve already heard, this bill is about confidence. Confidence is a really important part of our financial system, and confidence that’s actually based on fact really helps to ensure stability. So the deposit compensation scheme helps to give some certainty and fact. When we have that, then it helps ensure stability and certainty and confidence, and it’s sort of a self-fulfilling prophecy.

I’ve heard about all the amazing collaboration that has made sure that this bill is as strong as it can be. As somebody who is simply a mere client of a bank, I’m very grateful for all of the hard mahi that’s gone in. Because of that, I commend this bill to the House.