Treasury will now repay all depositors in every Crown guaranteed company that has defaulted

Treasury will now repay all depositors in every Crown guaranteed company that has defaulted

In the wake of the collapse into receivership of South Canterbury Finance, Treasury says taxpayers' will now foot the bill for all depositors of Crown guaranteed finance companies that default, including those that have already defaulted, regardless of any previous eligibility criteria in place for the Retail Deposit Guarantee Scheme.

(Update adds line on Treasury not disclosing what the extra cost to the taxpayer will be).

Acting Secretary to The Treasury Gabriel Makhlouf said the scale and complexity involved with repaying South Canterbury Finance depositors altered the costs involved in running the guarantee scheme.

"Repaying all depositors of all guaranteed companies that default will save taxpayers from having to pay ongoing interest that otherwise would have accrued as thousands of claims were assessed, processed and paid," said Makhlouf.

“Criteria relating to citizenship and tax residency will no longer apply and depositors will not be assessed using those criteria. The criteria for being repaid is that you are on the register of debt securities at the date of default,” Makhlouf added.

The decision applies for defaults by approved institution from the start of the current Retail Deposit Guarantee Scheme in October 2008 until it ends on October 12, 2010.

The following eight Crown guaranteed institutions have defaulted: South Canterbury Finance, Allied Nationwide Finance, Mutual Finance, Viaduct Capital, Vision Securities, Strata Finance, and Mascot Finance. 

"The Treasury will publish details in due course about the process for repaying previously ineligible depositors," Makhlouf said.

Spokesman Angus Barclay said Treasury wouldn't disclose at this point how much paying previously ineligible investors in already failed companies would cost the taxpayer.

Debt securities eligible for repayment include: call deposits, term deposits, non-guaranteed deposits, debentures, and bonds.  Equity securities such as ordinary shares and preference shares remain ineligible for repayment under the Crown guarantee. 

This decision means repayments will now be made to some depositors who may not have previously been eligible for repayment.

"Eligibility criteria that include citizenship and tax residency will continue to apply in the event of a default after October 12, 2010 by entities approved for the extension to the Guarantee scheme. The extension to the Retail Deposit Guarantee Scheme runs from October 12, 2010 to December 31, 2011."

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Some very heavy pressure brought this about...now from whom did it come?

Polling Wolly. Only a year at most to next election. If the Govt doesn't step in big time now, the economy's down the plughole before the end of summer. Key's strategists  really want to keep their numbers up  so National can hang on until after the World Cup and coast in off the feelgood factor, and there'll be no close look  at their policies with the hoo-ha around the rugby sucking most of the media airheads' airtime. That way they can finish what they've started this term in the structural reforms that are going to happen in their second term.

Clearly the pressure came from depositors who are non-NZ citizens who don't pay tax in NZ.  In other words - offshore capital investors.

That's where I'm going with this Kate......... somebody came in the back door that needs looking after.

Old 'debts' to be repaid?

I wonder how many 'family trusts' belonging to whom, happen to fit into the too hard not to bailout drawer?

Paul -As I understand it they`re paying out money to people "not" guaranteed ,because it`s easier to do that ,than work their way through a maze.Or am I wrong?

Why are you still in Noddyland?....when you get to aus, rent don't buy....one day soon you will understand why...in the meantime stop dreaming about getting rich when you have a wife and three kids...they are all the wealth you need!...less time trying to get rich and more time with the sprogs and the better half mate.

Bloke - take a deep breath.  I don't agree with the socializing of private losses either but try and keep things in perspective...

Don't think for a moment Australia isn't capable of making bad economic decisions for political reasons.

As for the tax you pay here - look at this and ask yourself - "is the grass always greener?"

https://community.oecd.org/community/factblog/blog/2010/05/11/tax-who-pa...

it was labour who brought the guarantee in in Nov 08!!!

Get over it.....and thanks for the bailout by the way:)

I invested my money in a company with a GG.

It collaspsed and the insurance is paying out.

Do you not insure your house and contents?

There is no welfare there.

No, I am not a greedy pig.

Thanks for the $400 towards my payout though. I really appreciate it.

If you believe that spin, you are a fool John.

I believe it was, but they were under pressure to follow Australia's lead, in order to stop a run of money out of NZ into Oz.

"Repaying all depositors of all guaranteed companies that default will save taxpayers from having to pay ongoing interest that otherwise would have accrued as thousands of claims were assessed, processed and paid"

I'm not happy about paying out otherwise inelligible people, either, but reading the quote above, it looks like keeping it quick and simple will save money, in that SCF et al is going to take ages to sort, during which time interest, admin, etc, costs all mount up.

Alan Hubbard has a lot to answer for....

and what would prosecuting all these people with fraud cost?

Get over it....and thanks for the $400 contribution to my GG repayment by the way:)

Off you go, I am sure they will be glad to have you.

Please pay your $400 share of my bailout GG money before you exit the country....and thanks by the way:)

Really Angry Bloke, I feel your pain. I wonder if there are any trustees of companies still standing and guaranteed till Oct 12, but with a few issues, whose eyes lit up at this news?

Good point Gareth. This pay-out smells like the Kiwi version of Ben Bernanke's money printing to save the US economy.

You must be joking,  is this any way to be running a Government?

Is this an indication of the respect this outfit has for the rule of law and taxpayers money?

So what if there is an interest component if the pay out is delayed, they are going to be borrowing the money anyway, there may be a difference in the rate that's all.

These guys are so stupid they'll be sending our money to Nigerian scammers next.

"These guys are so stupid they'll be sending our money to Nigerian scammers next." - That'd be funny if there wasn't an actual chance that they may well do so...

Anony, firstly how hard can it be to establish eligibility, let the claimants provide the proof, 99% of the rest can be done by some ning nong with a tick box. No "serious amount of time" involved

Secondly, - and this should have been done when they were rolled over by National - get  the finance companies to establish the eligibility of their investors. Not difficult stuff is it.

Well I suppose it would be easier to just throw away our hard earned to folk that aren't entitled.

It does bespeak a kind of glazed-eye desperation.

You have to realise they will look after their kind, and their 'core' voter types.

Which inevitably will be close to home.

This is only a symptom of their bigger problem, remember. Irrespective of which players are on or off the board, this is what you get under a sinking lid.

Pity some folk didn't listen to Donella Meadows et al, circa '72.

Greg G

FYI No credit rating downgrade for NZ, says S&P

http://www.interest.co.nz/news/standard-and-poors-says-south-canterbury-...

cheers

Bernard

Greg C, story on this going up about now. Bill English doesn't expect a downgrade...

100% payout and English says that most of the 1.6bn will be recovered?  Seems unfair.  The the payout should have been scaled back by at least any shortfall or that investors should have been made to wait for a final 100% payout.

Not at all impressed with this bailout.

They made their bed - they should also lie in their bed.

Have never had any of my funds in 'finance' companies - I have always seen them as Ponzi-esque - yet I am helping out along with all other taxpayers, paying for all the plonkers that have and thought it was a good thing.

As for blaming Key, English Cullen whoever - a waste of time.

The problem is not with the current politicians - it is with all politicians chasing votes and wanting to be seen to be doing something and acting like they are in control. The forces at work here are beyond mere politicians ability to sort out..

A plague on all their houses.

Grumpy grumpy

@BMR789

thank you very much for your $400 share of my GG bailout.

I appreciate it:)

I dunno, a good teacher mighta had you spellin' gooder.

Remember the government guarantee for banks was seperate to the GG for finance companies, with the scheme being extended to deposit taking entities later than that to banks. the rationale for extending the scheme from memory was a little different - the Govt needed banks to keep on lending and avoid stressed borrowers, and bought into the (BS) that the banks were too important to fail. I have no idea what the rationale was to extending the guarantee to finance companies was, other than to stop a run of funds out of them to banks that were covered.

work out what the future holds (it's not rocket science, read a little Heinberg, google Prof Albert Bartlett, take a look at Stuart Staniford's blog) then stockpile what you think will be needed.

Wa/olly was onto it with copper. PV panels would be a good bet too. Don't think in terms of making money, skip that step and realise that money is just legal tender - go for the stuff of scarcity. It may be that you can make your house less energy-dependent, which is effectively the same thing. Ours costs nothing to run these days - last time we paid a power bill was back in '04.

The fiscal system can't outsurvive peak energy, unless everyone agrees to zero (then negative) interest - ain't that what we are seeing now? - so investing, in the traditional sense, will be a waste of time. If energy is to become the scarcity, why not invest in not being beholden to it?

cheers

As per pdk - a safe haven property steeped in self-sufficiency - combined with shortish-term term deposits for the balance, as interest rates are only going one way from here.

Now aint that the truth.

Most of that 250 mil goes on paying for Labours last bribe called 'WFF' that National aint got the balls to get rid of

We have been a socialist egalitarian state for many decades now , and this privatizing of SCF losses just proves the point . Both Labour and National have fallen into the trap of social welfarism . Buying votes ............... and picking someone elses' pocket to pay for it . Lest we forget , under both Mulddoon and John Key , the businessmens' friend , National , have behaved just as spendthrifty , just as wasteful of tax-payers' monies , as those perennial wastrals , Labour ............

WE ARE STUFFED !

Government simply wants the cheapest option for taxpayer. Back in 2008, there was no choice but to bring in the GG as otherwise huge amounts would have been taken out and deposited in Ausy and elsewhere, all who had brought in GG's.There would have been a depression in NZ there and then.

Now, it is cheaper to quickly pay every investor back quickly, rather than spend a lot of time trying to work out who and why are/are not eligible (gets very complicated ), as otherwise there would be an on-going interest bill piling up- I had deposits with SCFat 10.5% and 10.75%, so can understand why the govt wants this paid asap.

But there was never a need to include finance companies.

Time to sue the government i think. Bailing out yet another private company and it's investors is surely against the rules around justifying tax collection. This is selective 'welfare' for specialists groups

Get a grip Justice. The GG came about through no choice of the government, unless it moved once Aussy govt brought their one in, NZ was facing a run on the banks.  Now, it has to honour the agreement as best it can.  What's the point of suing the government, that's just nonsense .  Thank goodness English and Key seem to be more level headed than the emotive clap-trap some are coming up with on this site.

$400 each?

That's a cool $2K my family has to pay for other people's greed and stupidity. That's more than the one-way tickets to Oz. Finding it harder and harder to justify staying here.

Dear Chump Change..... you seem to miss the point....there is a Principal involved....or do we just roll over now every time we get some new Govt imposition served on us without explanation (in detail) or accountability.

I have always said and will say it again, this country looks after the very rich and the very poor ....if you are in the middle YOU are the sucker who bails these groups out ....SCF is a classic case in point.

"Privatise the gains and socialise the losses" seems to be the norm ......... the greed of those at the very bottom (expecting handouts) and those at the top of the economic heap (trying to make an unsustainable "fastbuck") have caused this mess .... so they should be the ones that sort it out.

Has anyone out there heard of the expression "PERSONAL RESPONSIBIITY" !

 

And that's why we are set to become the Financial hub  of the South Pacific .

Because the taxpayer unwittingly underwrites every sweet deal....

And the same question arises to every sticky situation .....In whose interest..?

Mom and Pop ......? my arse

P.S. Bernard don't forget to add the new debt to each taxpayer Household debt ratio plus projected interest as they (for the most part) are in hock to the eyeballs or just flat broke.