Deposit Takers Bill

Members, we come now to Part 7. This is the debate on clauses 256 to 421—crisis management and resolution. The question is that Part 7 stand part.

Mr Chair—

CHAIRPERSON (Greg O’Connor): A quick—

ANDREW BAYLY: Sorry, I was just waiting for Shanan Halbert to stand up and give us a contribution. I was just giving the opportunity to members of the Labour Party to actually make a contribution to this debate, so I apologise for being a bit tardy, Mr Chair.

So this is quite an important part of this bill—as the Minister no doubt knows—and I think it is fair to say after the CBL Insurance debacle, it is welcome that we now see, in this part, arrangements for an orderly and planned process if entities get into trouble and there’s a way for the banks to look after it.

I suppose my reading of it is it’s almost like an administration-type arrangement under the auspices of the Reserve Bank without formally going into a receivership situation, which means you’ve got to appoint a receiver; or even liquidation, where it’s subject to different law. My reading of this is this is undertaken where there’s a work-out opportunity or, in fact, there’s such a degree of risk or a potential impact on the financial sector that it is important for the Bank to manage it in an orderly way because it may impact on the standing of New Zealand internationally, but certainly may impact on the way depositors view entities in New Zealand.

So that part of it’s all pretty good. There’s a couple of little things I did want to talk about. Clause 295: “Bank is [the] resolution authority” and “the Bank must act as a resolution authority in relation to the resolution of the licensed deposit taker.” Then it states that the Bank can appoint a resolution manager—and the appointment of the resolution manager is covered in clause 354—which means that that resolution manager—can it be the Bank itself that’s expressly provided for, or in fact can it be someone else that the bank thinks is appropriate?

What may be useful is for the Minister just to set out what is the role of the resolution authority, and what is the role of the manager; and when might be appropriate that the Reserve Bank acts both as the resolution authority, as provided for under clause 295; and the resolution manager, as provided in the subsequent clauses. Because just understanding the context for this and how that comes about, and why we would end up with those sort of situations, would be useful to have an understanding on.

Thank you very much, Mr Chair. My questions relate to Part 7, clauses 346—which is part of Subpart 7, where the Minister may give directions.

I guess the point of clarity here is that we make a lot of the fact that the Reserve Bank, in particular, sits very much independent from the members of this House and, in particular, the Minister in regards to not taking direct direction. But these aspects of the bill do provide quite wide-ranging powers to the Minister.

I refer specifically to clause 347 in regards to where the Minister may direct the Bank relating to the exercise of resolution power. This can include whether a resolution is actually exercised or not, the manner in which it’s exercised, and the way in which that power is exercised in terms of both the terms and conditions that are set in regards to it, but also, you know, clause 347(f), which refers to—it’s another one of these catch-all statements—“take any other action that is specified to avoid or minimise, or otherwise manage the risk”, which is quite generic.

So I guess I’m seeking clarity from the Minister in regards to the appropriateness of the Minister getting involved to make directions to the Bank, the appropriateness of this, and in what circumstances would that be foreseen and the consideration around the threshold for which the Minister would consider it appropriate to step in to that aspect. Acknowledging the importance of the fact that the Bank is, and does, operate as an independent entity from the Minister in normal business.

Both of the questions asked by Mr Bayly and Mr Watts are, in fact, laid out in the bill. I just take Mr Watts’ last statement: it’s very, very clear when one reads clause 346 exactly when this would apply. It wouldn’t be a matter of choice for the Minister at the time if they thought that this was something that they should do; it actually follows on very strongly that this is around public money. It’s the use of the word “and” that will help everyone follow clause 346 through. It has to involve public money and, indeed, that there would be a material risk to the prudent management of public money. That is the circumstances in which a Minister would be involved. Similarly, the role of the resolution authority and the resolution manager are laid out in a variety of clauses in the bill, which are quite easy to read and follow.

The question is that the Minister’s amendments to Part 7 set out on Supplementary Order Paper 361 be agreed to.

Amendments agreed to.

Part 7 as amended agreed to.

Part 8 Miscellaneous