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This bill has been around for a wee while coming through the process. You know, it's really not the sexiest bill this House is ever going to see. But Dr Russell and I will be very excited about it all, won't we? We'll talk about the grammar in it. |
One of the things I think is interesting is that this bill has been around since 2015-16, after policy statements and work done by the Reserve Bank and the previous Government, of which I was part. Why is it that we're even doing it when everything seems to work quite well, one could well ask oneself? I guess the answe... |
Re-reading certainly this bill's digest, I was thinking a little bit about the anti - money laundering and countering financing of terrorism legislation, for which I have to say I confess to having been the poor Minister who had to bring that through the House. That, again, was all about international markets and inter... |
In this particular case, it's worthwhile to note that even though we are a small country—smaller in population than Melbourne, although greater in size than the United Kingdom—around NZ$35 billion flows through our financing, retail, and wholesale payment system each day, and I have to confess to having been responsibl... |
So we will be supporting this bill, certainly at first reading. We're not indicating anything else, but I think there's not a lot of politics in this, so hopefully the select committee will be able to look at this bill and consider all of the measures in it as a team, working cross-party, to see whether or not all of i... |
FLETCHER TABUTEAU (NZ First): Thanks, Madam Speaker. It's a pleasure to speak, on behalf of New Zealand First, to this bill, and just to address some of the concerns that were, I think, fairly addressed from the Opposition speakers. Firstly, in response to the Hon Judith Collins, yeah, a very constructive contribution,... |
Having said that and to put that in perspective, as both previous speakers in the Opposition noted, this bill comes to us over the length of several years. In fact, it was the IMA—the international monetary authority? |
Dr Deborah Russell: IMF. |
FLETCHER TABUTEAU: IMF—fund, sorry—who came to New Zealand in 2016 and had a conversation about the operations of these systems, the mechanics—"the plumbing", as it has been colloquially called in the House this afternoon. It was a fair observation from the IMF that there is a high degree of risk, which the previous sp... |
So I'll just touch on what it is we're technically talking about and what the bill sets out to achieve in the first reading. So the infrastructure legislation here, the financial market infrastructures (FMIs), refer to multilateral systems that provide trading, clearing, settlement, and reporting services in relation t... |
However, in New Zealand the regulation of FMIs is limited. I think that's why we agree we've come to the House today. So what, I think, members will support is, fundamentally, this bill is about implementing new and more complete oversight regimes. Fundamentally, this is about accountability. So this has been a continu... |
I just want to end on what it is we're trying to achieve in terms of—we've heard about designated and non-designated FMIs. Actually, no, I'll just touch on the bill in terms of general monitoring of FMIs by giving regulators certain powers, and I just want to touch on those powers: the power to require operators or par... |
So I, too, look forward to the conversations and, actually, the submissions, because this was well notified to the public in a draft form several years ago. There has been a lot of public consultation on this and contribution to the drafting of this legislation that we see before us now. So, I think, what we will see g... |
ANDREW BAYLY (National—Hunua): Thank you, Madam Speaker, and lovely to see you back in the chair this year. It's my first opportunity to speak and I just wish everyone well and hope they had a great Christmas break and back for an exciting year, of course. |
Now, we've already heard that National is supporting this Financial Market Infrastructures Bill. I think, to some extent, there's been a lot of canvassing of what it means. I thought, for many people listening in, there are a lot of acronyms, there's a lot of terminology being used in this bill. I thought it might be u... |
So, for instance, if you wanted to take on a fixed loan at a certain rate in a certain currency, and you were forced to do that—let's say borrowing in New Zealand dollars—you may at one point want to swap that out for Australian dollars and use a different interest rate. You can use derivatives to design the instrument... |
So people have been talking about trade repositories and swap data—this is the system by which all those derivatives are captured and actually collated so, actually, people can start to understand where the risk lies. You will recall, during the major meltdown in the world financial crisis, a lot of it was driven out o... |
There are two types of derivative tradings. One is over the counter, and one is exchange trading. Now, exchange trading is basically—the analogy is if you were selling and buying shares, you would be selling those shares over the New Zealand stock exchange, and, therefore, that's a very transparent transaction. There's... |
Originally, it was this sort of opt-in arrangement where, if you're a financial institution—and I just use ACC as an example. If it was trading over the counter, possibly some of those trades would be recorded, and, obviously, they would be, because they're a very reputable institution. But what this situation allows i... |
There's a whole lot of other stuff in the bill that we'll be going through in select committee, but, essentially, that is the purpose of this bill. Of course, it was a bill first proposed by National, and we're getting through to the stage where it's finally come back into the House. We need to move this bill through, ... |
JAN LOGIE (Green): Thank you, Madam Speaker. Boy, did I get lucky today to get to speak on this bill, which, obviously, so many people have been fighting to get to speak on, and to offer the Green Party's support for the Financial Market Infrastructures Bill. This is, basically, setting up regulation of financial marke... |
I would recommend anyone who's following this debate or looking at this speech randomly to go to the speeches of Dr Russell and the previous speaker, Mr Bayly, for, actually, a fuller understanding of what financial market infrastructures are. It was described by a previous speaker as the plumbing of our financial syst... |
I have heard in some of the previous speeches an issue or concern raised that there doesn't seem to be a problem in the system, so just a questioning about the need for this legislation. I would note that the need or the value of this was raised by the International Monetary Fund in looking at this as our position with... |
The fourth point of market failure that was identified in the Cabinet paper was negative network externalities where a financial market infrastructure operator may not fully consider the wider social cost of their conduct. So I think that really is raising, in more simple language, I guess, that it can be very easy for... |
So it will address this market failure by establishing information-gathering powers that allow for ongoing regulatory oversight and monitoring, will create a designation scheme to enable the creation of regulatory standards for FMI operators, and provide for different types of penalties for breaches, which will include... |
Hon JACQUI DEAN (National—Waitaki): Thank you, Madam Speaker. I hesitated to get to my feet because I was reading some quite interesting background to this bill in the debate pack. First of all, I have to confirm that National does support the Financial Market Infrastructures Bill at its first reading. The information ... |
So the background to this bill—and I congratulate Minister Grant Robertson for picking up this work and then bringing it to the House—really started to form in 2015 and 2016 when the Reserve Bank placed forward some policy proposals to update the regulatory regime for financial market infrastructures. The National Gove... |
The bill, effectively, replaces the existing regulatory regime for financial market infrastructures, and they are contained within the Reserve Bank of New Zealand Act. The purpose of the new regime is, overall, to promote the maintenance of a sound and efficient financial system. That has got to be the prime purpose of... |
One more point—because I know there are other speakers to follow—the new regime will apply to more entities than the current one. So the scope of the Financial Markets Authority will widen and capture more financial markets institutions. We do support this bill. I do have a question—regrettably, I don't sit in the comm... |
TAMATI COFFEY (Labour—Waiariki): Thank you, Madam Speaker. I'm so pleased to actually join the chorus of support for this bill, the—let's get it right—Financial Market Infrastructures Bill. I've stood here and I've listened to all of the speeches that have gone before me and, as my colleague Dr Deborah Russell said, it... |
I guess, to cut a long story short, we've obviously, as a Government, as a Parliament, had some learnings off the back of the global financial crisis. If this bill is going to help us to be able to better navigate ourselves whenever there is a financial market failure, then obviously it should be supported. I'm not goi... |
DAN BIDOIS (National—Northcote): It's a pleasure to rise today and to give my first speech in the House in 2020, and can I say I'm looking forward to the year ahead. No matter which side of the House you sit on, welcome back to Parliament. It's a pleasure. |
We're here today discussing the Financial Market Infrastructures Bill. We've certainly learned a lot today in the House, whether it's from Andrew Bayly about derivatives, whether it's about the definition of learnings or lessons from the Hon Judith Collins, or whether it's the technicalities of FMIs—or financial market... |
The purpose is, really, to introduce a new regime to designate some financial market infrastructures as systemically important. For those of you at home, you may remember back in 2008—and I remember very clearly—learning this terminology called "systemically important". It was in relation to Lehman Brothers, which, of ... |
I want to be clear to those at home who might be thinking, "Well, The National Party is about minimal regulation. What are they doing supporting this bill?" I want to be clear about why we're supporting this. Firstly, the payment system every day—have a guess at how much goes through our payment systems here in New Zea... |
But what does that mean? It means, in effect, it's not going to be over-regulation. What we're really talking about is a tiered approach to regulation. Some financial infrastructures will be designated as "Tier 1, systemically important"; "Tier 2"; or "Tier 3". For those who are Tier 1, systemically important, we're re... |
So that is, at the moment, the extent of the regulatory powers. I think it's the right level of regulation. The National Party will support this to select committee, and we support this bill in the House. |
JAMIE STRANGE (Labour): Madam Speaker, thank you for the opportunity to take my first call of the year in the House and follow the member from Northcote, Dan Bidois, with his rather colourful language, but I certainly appreciate the contribution. Thank you, sir. |
We've heard from various speakers around the importance of sound and efficient financial systems. Generally speaking, we do have sound and efficient financial systems, but we have heard for a number of years from agencies like the International Monetary Fund, and particularly work done by the Reserve Bank, that we do n... |
We heard from Dr Deborah Russell around the aspect of EFTPOS transactions, just using one example of what this bill might cover. Now, if we look at society and we go back many years—I'm not sure anyone in this House remembers—there was a period of bartering as a society, when we didn't have any cash. |
Then we moved to cash, and for many years people used cash to fulfil transactions. However, we're quite quickly moving to a cashless society. In fact, for me personally, I very rarely carry cash, which gets rather embarrassing when raffles are put in front of my face. I'm sure many members of this House and many people... |
I mentioned before that the Reserve Bank has done a little bit of work in this area. The Reserve Bank oversees New Zealand's financial market infrastructures—the FMIs—such as payment and settlement systems for the purpose of promoting the maintenance of a sound and efficient financial system. FMIs are a critical elemen... |
There's a second point that I'd like to highlight, and that is the fact that this bill provides a framework that would bring the regulation of FMIs in New Zealand broadly into line with international standards. We heard from the speaker Judith Collins around the IMF and other international agencies who have been talkin... |
The new regime is tailored to the needs and systemic importance of individual FMIs. This approach focuses regulation on the most important FMIs while minimising barriers to entry and compliance costs, which might otherwise hinder new entrants and the development of new products. |
We've heard, I think, a range of views and a range of information. I've just added in a little bit there just to highlight a few extra points. Without further ado, I commend this bill to the House. Thank you. |
Rt Hon DAVID CARTER (National): Thank you, Madam Speaker. As I listen to this debate on the Financial Market Infrastructures Bill, it strikes me that we all take our banking system absolutely for granted. We think it's safe. Our salaries, our wages; for everyday New Zealanders, it goes into their bank accounts and over... |
So this piece of legislation is largely the result of work carried out by the IMF—the International Monetary Fund—following the global financial crisis, which is now 12 years ago, which shows how long it takes for countries right around the world to accept that financial institutions need to be regulated. And, of cours... |
As I've listened to the contributions from many of the speakers, most of them—in fact, I think all of them—have remarked on how complex this issue is. We have words like "securities" and "derivatives" and "depositories" and "trade repositories", all of which come together in the settlement of funds on a daily basis to ... |
So we'll support it to select committee. The two things I want to particularly watch before the select committee are: what are the benefits—and if it results in a safer banking system, which is required in this day and age, then I'm all for it—but I'll equally be watching for the costs, because this reform may well com... |
But, having said that, as I said at the start of my contribution: above all else, we all require a banking system in this country that we have faith in and that we know will not fail. As we move from those dim, dark days of 2008—12 years ago—of the global financial crisis, it's important that we move with the time, mod... |
GREG O'CONNOR (Labour—Ōhāriu): I think the previous speaker has alluded to what happened in 2008. I think what really happened in 2008 is that New Zealanders, and, indeed, many around the world, suddenly understood how vulnerable they were to what happened on the world markets, particularly Wall Street. |
No one had heard of derivatives outside the financial markets at that stage. I do recall reading some literature about the lead-up to 2008—there was a meeting in Davos, Switzerland, where one of the leading regulators in the world stood up and some of the biggest, greatest financial brains and investors were at that me... |
So bring us forward to this piece of legislation: the Financial Market Infrastructures Bill. What we need to assure and reassure those who are in managed funds, those who may even have their money in the bank, is that there is a playing field which is being regulated so that those who were rendered vulnerable, those wh... |
So it's incredibly important that we, those who have money that is moving through the financial systems, have some confidence that there is some regulation. Just to give an example of what happens if there is no regulation—of course, we've got the block chain, bitcoin, which is actually happening, which is completely u... |
So I have no hesitation in commending this bill as the last speaker on this, the first reading of this bill today. And I think that those who are watching, those who've survived this long through the debate, should feel some satisfaction that there is now some work across the House being done to inure them against futu... |
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