Comparisons Between Prostitution And The Covered Bond Market

Comparisons between the covered bond market and prostitution were made in Parliament on Tuesday.

Labour MP David Cunliffe made the association as MPs debated the first reading of the Reserve Bank of New Zealand (Covered Bonds) Amendment Bill

The bill allows and regulates the use of covered bonds by New Zealand banks. Covered bonds are usually a cheaper source of funds for international banks which in return means the lender gets preferred security to a bank’s assets if it gets into financial difficulty.

Associate Finance Minister Steven Joyce said the bill was important to maintain financial stability and to ensure New Zealand banks had the same access to funds as other banks around the world.

David Parker said Labour would support the bill to select committee but expressed concern that covered bond holders would have secured preference to assets over unsecured deposit holders should a bank go bust. Balancing this was that access to cheaper financing through the covered bond market would make it less like for a bank to go belly up.

Labour MP David Cunliffe said the decision on voting in support of the bill was a similar to that he made over the legalisation of prostitution. There was something unsavoury happening in the market place and was it better to regulate it, or ignore it? The decision for the Labour caucus in the case of covered bonds was it was best to regulate it.

Video via In the House

The bill was sent to the Finance and Expenditure Committee for consideration on a voice vote.

Earlier in proceedings the Arts Council of New Zealand Toi Aotearoa Bill completed its second reading by 72 to 49 with the Labour, Greens and Mana opposed.

The Crown Entities Reform Bill also completed its second reading with opposition parties indicating they would oppose parts of the bill in select committee.

The main point of opposition is the move to wind the Charities Commission into the Department of Internal Affairs which they fear will reduce its independence and allow ministers to interfere in decisions.

They called for the merger to be deferred until a scheduled review of the Charities Act was completed.

National MPs said the law underlined the Commission’s statutory independence.

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