Deposit Takers Bill

Members, we come now to Part 2. This is the debate on clauses 10 to 58, “Licensing of deposit takers”. The question is that Part 2 stand part.

Thank you, Mr Chair. You’re very generous tonight.

CHAIRPERSON (Greg O’Connor): You’re very eager, Mr Bayly!

ANDREW BAYLY: Ha, ha! On Part 2, obviously, it really deals with the issue of issuing of licences and then an issue around validating and making sure that directors and senior officers are appropriate people.

The first thing I just want to ask—it’s just a technical point. Clause 20, just to help the Minister, “Consultation requirements”. I think it’s in relation to overseas people, applicants, because it all seems to be in that relation—clause 18 is all about overseas applicants. First question: is it written in relation to overseas—or whether it’s domestic applicants?

But the “Consultation requirements”: “The Bank must, before making a decision under section 17, consult—(a) the FMA; and (b) the applicant about the conditions and standards that the Bank proposes to impose in relation to the applicant (if the Bank issues a licence).”

Anyone in this sector is designated or regulated financial institutions, and of course, the Minister will know what that means, being a technical term. As regulated financial institutions, all everyone in this group who would be applying for a licence here would be under the jurisdiction and auspices of the Reserve Bank. So my specific question is: what would be the objective and requirements of consulting with the Financial Markets Authority (FMA)? What information would the bank be seeking from the FMA, in terms of this consultation?

So there’s two little parts to that, if that’s OK. The first one: is it domestic or is it just overseas? And then: what is the type of information that will be sought from the FMA, and why would they be making a recommendation?

In answer to the first one, I think if the member looks, he’ll see that clause 20 refers to section 17. Section 17 is everyone; section 18 is the bit where we start talking about overseas people. So that’s the answer to that part of the member’s question.

In terms of why one would be talking to the Financial Markets Authority, well, the Financial Markets Authority are in charge of the conduct of financial services activity in the country. They are responsible for certain standards within the sector, and I imagine, in order to make a decision about the granting of licences, they would want to make sure that there was no reason within that kind of conduct area that they would want—but I’m happy to check with officials to see if there’s anything more they need, Mr Bayly.

Thank you, but I think that’s a flying good leap of an answer. But if we’re talking about conduct, you’ve got Conduct of Financial Institutions (CoFI) and you’ve got the Credit Contracts and Consumer Finance Act (CCCFA). As the Minister of Finance knows very well, CCCFA is administered by the Ministry of Business, Innovation and Employment and the Commerce Commission, and then the CoFI is administered by the Financial Markets Authority (FMA). So both of them are conduct ones. I can understand if it’s in relation to CoFI, but that doesn’t then pick up why the CCCFA. And I’m not sure that’s a reason why they would be actually seeking advice from the FMA. I don’t know whether you’ve got an answer.

OK, well, I’ll just carry on with the second one while the Minister’s getting that answer. The second one is in Subpart 4, clause 26, “Licenced deposit taker must obtain Bank’s approval before new director or senior manager is appointed”. That’s all pretty clear, but what’s a senior manager? Is a senior manager a CEO, or does it go down a level? If we take a large bank, one of our top four, you know, senior management might be a head of institutional banking and there might be seven at that level—retail banking, whatever, if you look at a general banking structure. But in a non-bank deposit taker, you might find there’s a much more streamlined, simplified management structure. So just quite keen to understand: what is “senior manager”?

I’m pleased, Mr Bayly—you know, he’s worked on this bill for a while, but if he just takes a little time to go to page 29 of the reported-back bill, he’ll find quite an extensive definition of the term “senior manager” there. I don’t propose to respond to all of Mr Bayly’s questions about definitions that already exist in the bill, and I can confirm to him that the reason that the Financial Markets Authority is there is because the Credit Contracts and Consumer Finance Act really doesn’t apply, so the Commerce Commission wouldn’t be interested in being there.

The question is that the Minister’s amendment to Part 2 set out on Supplementary Order Paper 361 be agreed to.

I seek leave for the remaining provisions to be taken as one question.

Leave is sought for that purpose. Is there any objection? There is objection.

Part 3 Regulation of deposit takers