Deposit Takers Bill

Members, we come now to Part 4. This is the debate on clauses 98 to 146, “Supervision of deposit takers”. The question is that Part 4 stand part.

Thank you very much, Mr Chair. I’m interested in comments from the Minister in regards to a number of clauses: 100, 104, and 106—in particular, there, in regards to the offences, and the amounts liable on conviction both for the individual and in any other case, and the scale of the offences set there at the rate of $50,000 for an individual or, in any other case, a fine not exceeding $500,000. We talked previously around the proportionality considerations in regards to this legislation. Part 4 is in regards to the supervision of deposit takers and, in effect, the banks’ information-gathering requirements, but it would be fair to acknowledge that particularly for our larger banking organisations—particularly in the interests of what the Government has been commenting in the public domain in the last 24 hours—a fine of $500,000 is not going to be potentially driving outcomes. So I’m interested, Minister, in why that amount was set at that level and whether the Minister is comfortable that that will provide the appropriate degree of tension in order to drive the behavioural response around the provision of that information.

The other aspect and the other question area that I’ve got in regards to this section is around clauses 108 and 109. That is in regards to “Auditor to inform of intention to disclose” and the protection of auditor aspect. Obviously, there is agreement from this side in regards to the need to have that audit function, but the considerations around the ability for the auditor to be able to disclose information that potentially is gathered through that information-gathering process is an area that potentially would open up the auditor, in this instance, to potentially some questions around scope of audit and the ability for the auditor to actually have to disclose that information, which may or may not conflict with the terms of reference which the auditor would enter into in regards to the provision of those audit services. So I’m interested in whether the Minister would look to make any comments in regards to that and whether he believes that we’ve got that balance right in regards to that portion.

The other clause that I wanted to just have a couple of questions in regards to was, under Subpart 2, “On-site inspection”, clause 114, which is relating to the “Offence relating to [an] on-site inspection”. This clause deals with where the employee or a director or an agent for the deposit taker commits an offence when they fail to deal with the requirements of the clauses in regards to the provision of that information—again, in that respect, whether the threshold around refusing or failing to comply with the giving of information is an appropriate mechanism in regards to initiating an offence and whether the Minister is comfortable with clause 114(1)(b), which is “resist, obstruct, or delay the Bank in carrying out an on-site inspection”. It sounds a bit rougher than dealing with a ram-raider at the moment, Mr Bayly.

Tama Potaka: Not in Hamilton!

SIMON WATTS: Not in Hamilton says the member for Hamilton West, and rightly so. But anyway, Minister, that’ll do for this stage. I’m interested in your comments on those.

On the first and the last matters that the member raised, I am comfortable. The way that these Acts work, when it comes to fines, is that there is an exercise done to look across the board at the way fines work across legislation, and a proportionate approach is taken. And I’m sure that’s what has been done here. And, on the last point, I’m uncomfortable.

On his middle point, I would just refer the member to clause 107, which indicates the severity of the threshold for which an auditor would undertake the provision or the disclosure of information, and it is that the licensed deposit taker or associated person has contravened a prudential obligation or contravened various parts of other Acts that relate to their duties, or if they’re in serious financial difficulty or operating fraudulently or recklessly. So I think the threshold is particularly high here, and the bank itself obviously has its job when it’s working directly with the deposit taker, but this allows the opportunity for an auditor when a particularly high threshold of poor conduct has been achieved. So I am also comfortable with that.

Thank you, and I’d like to thank the Minister for his contribution there. I want to turn to a related topic, which is clause 130. This deals with the issue of confidentiality orders. I must admit, I get worried when the Reserve Bank or any entity—in this case, it is the Reserve Bank—has written its own legislation and writes in a clause that says “(3) The Bank may make the order”—and that’s in respect of confidentiality orders—“on the terms and conditions (if any) that it thinks fit.” So this is a very significant power, and I can see the Hon Phil Twyford looking at me, saying, “Oh, I didn’t notice that one before.”

What I’d like to hear from the Minister is whether this is proportionate, particularly when I’m going to talk about fines in a second, but just bear in mind that the confidentiality orders, the bank may require that, which prohibits the publication or communication of any information that discloses or is reasonably likely to disclose the exercise of a power under this Act—oh, that’s a wide one—and secondly, that is provided or obtained in connection with any inquiry, investigation, or other proceedings of the bank under this Act. So the bank may make the order on its own initiative, so to what extent are these powers fettered? Can the Reserve Bank—it’s now divine God, I presume, and can make its own decisions and impose anything. Maybe the Minister can help me where the constraining elements of this power is under clause 130.

But the other reason I raise this issue, Mr Chair—because I know you’re very keenly following this debate—is the issue of the fines, which, of course, my good colleague Mr Simon Watts was talking about in his previous excellent contribution. In this case, there’s the same sort of level of fines. There’s total fines of $5 million for a corporate or an entity. In this case, if you happen to disclose the information that the divine right of the power of the Reserve Bank has deemed shouldn’t be disclosed, either you’ve done it in contravention or you’ve done it recklessly, which means—whether in fact that may mean you haven’t shown enough constraint over your PR person in your large PR team, as sometimes happens with Ministers when they press the wrong button and all their press releases go out to a member of the Opposition, which happens from time to time. Whether that might be deemed a reckless situation—and I hear Nicola Grigg laughing there in the background. It does happen, doesn’t it, Nicola Grigg, from Ministers. So would that be deemed reckless and therefore potentially someone would be, in the case—was it the poor PR person in the entity—

Nicola Grigg: Don’t blame the press secretary.

ANDREW BAYLY: The press secretary, or was it in fact the Minister? It might be Mr Grant Robertson—the Hon Grant Robertson—who’s reckless. In what situation is “reckless” defined?

But the big point about this is that: “I’ve got it wrong, I blew it—I’ve blew it.” That individual is now up for a fine of up to $100,000 or $2.5 million for the entity. Of course, I heard the Minister say this, and it’s always these soothing words: “Oh, that’s the maximum, but don’t worry, we’ll never go there.” It’s a bit like—I heard that earlier today at the Finance and Expenditure Committee when Minister Parker said, “We’re not going to use that really extensive power of inquiry because we’re never going to ask those questions.” But yes, we do.

So there seems to be a lack of proportionality in this in terms of the fines, but also there does not seem to be any fettering or control or restraint around these powers, and I would very much like to have a contribution from the Minister as to why he thinks this is absolutely essential in the form that it’s been presented in the bill.

The time has come for me to report progress on this bill.

Progress to be reported.

House resumed.