ASB says it has coughed up NZ$36.8 mln for Crown retail deposit guarantee scheme

ASB says it has coughed up NZ$36.8 mln for Crown retail deposit guarantee scheme

ASB says its participation in the Crown retail deposit guarantee scheme has cost the bank almost NZ$37 million.

In an unusual step, ASB has made a precise disclosure in its latest General Disclosure Statement (GDS). ASB says it paid non-refundable fees to Treasury for the Crown guarantee of NZ$18.3 million for the first 12 months of the guarantee period and NZ$18.5 million for the second 12 months. That makes a total of NZ$36.8 million.

The retail deposit guarantee scheme was introduced by the then Labour-led government on October 12, 2008 at the height of the Global Financial Crisis. Just how much the Crown has been paid in total fees from entities participating in the guarantee scheme is unclear, although it would be in the hundreds of millions of dollars.

The Treasury only releases the total sum collected from companies participating in the scheme with its June year end financial statements. The June 2010 year statements won’t be released until mid-October.

From its October 2008 introduction until June 30, 2009, Treasury had received NZ$228 million in fees from the 70 odd entities participating in the scheme. The total figure includes NZ$74 million collected in guarantee fees plus another NZ$154 million paid in advance by firms to cover future participation in the scheme.

The bulk of the fees have been paid by the big four banks - ANZ, ASB, BNZ and Westpac. Under the guarantee, financial institutions with total guaranteed retail deposits above NZ$5 billion are charged a fee of 10 basis points per annum on the amount of deposits above NZ$5 billion. Treasury says this means a bank with NZ$20 billion in retail deposits, for example, would pay NZ$15 million a year in fees.

After last month’s collapse into receivership of South Canterbury Finance (SCF), Prime Minister John Key predicted the net cost to the taxpayer of Crown guaranteed finance companies that fail would be between NZ$300 million and NZ$400 million. Treasury loosened the rules after SCF's demise meaning some depositors and stockholders in other failed but guaranteed companies who may not have previously been repaid will now be repaid by the Crown.

Treasury says while this will incur an upfront cost, it is cheaper overall because it facilitates immediate payout of depositors and avoids the need for the Crown to make future interest payments.

So far eight firms covered by the guarantee have defaulted:

SCF owing 35,000 depositors about NZ$1.6 billion, plus bondholders NZ$250 million and prior charge holders including Pyne Gould Corporation's Torchlight Investment Fund about NZ$175 million.

Allied Nationwide Finance owing about 4,500 depositors approximately NZ$130 million in deposits.

Mutual Finance owing 340 depositors NZ$9.3 million.

Viaduct Capital with 94 depositors owed NZ$7.3 million.

Vision Securities with 958 debenture holders owed NZ$28.4 million.

Strata Finance with 21 depositors and $448,000 in deposits.

Mascot Finance with 2,558 debenture holders with NZ$70 million invested.

Rockforte Finance owing 70 depositors about NZ$3.2 million.

The guarantee ends on October 12. However, the extended Crown retail deposit guarantee scheme then kicks in running until December 31 next year. So far eight companies, including SCF, have gained approval to participate in the extended scheme.

The others are Canterbury Building Society, Equitable Mortgages, Fisher & Paykel Finance, Marac Finance, PGG Wrightson Finance, Southern Cross Building Society and Wairarapa Building Society.

Reserve Bank governor Alan Bollard has said there is no need for banks to enter into the extended guarantee scheme. ASB says it has not applied to be covered by the extended guarantee scheme but hasn't yet definitively decided whether it will or won't. ANZ, BNZ Kiwibank and SBS Bank say they won’t be applying.

* This article was first published in our email for paid subscribers earlier today. See here for more details and to subscribe.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

36 Comments

ASB, apply for the extended GG and be the only NZ bank with one.

I will leave the other banks and bring my deposits to you if you do.

Stop all the advertising on the TV and spend your money on the GG instead.

Hi We Are Stuffed. Are you certain that ASB is the only one to extend? We have a substantial amount in Westpac as does my father-in-law. We live overseas, so my husband tried to communicate with Westpac via email re the GG. They've been very unprofessional about it. Rather than just saying "no" or "yes", they didn't bother to answer the email. Several email later, someone wrote and said they would get back to my husband. No one got back to him. More emails from us to Westpac and then someone wrote and said that their legal department would answer our simple question! And now? Still no reply from Westpac.

I know - because of this website - that Westpac NZ has a significant portion of it's loan book in NZ mortgages. Despite the fact that the NZ Govt. has declared that the GG was only a measure to prevent flight of NZ deposits to Oz, I am not entirely comfortable with not having a GG on our NZ monies. 

Even though the NZ Govt (or ultimately, the Oz Govt) would probably need to bail out any of the big 4, we will be transferring the money - removing all from Westpac and spreading it amongst others - when we go down in October. Their behaviour is SO unprofessional.

Right now, I am just wondering which banks are best to stick the money in. I would appreciate any advice. Thanks!

Bugger the banks mae...check out the surviving finance companies that are taking the EGG.(4 of them)

Run your finger down the best of the best share companies...the utilities and put some in aussie stuff that is zero franking...no point in being double taxed is there...you might also buy some gold at the mint on the next BIS fiddled dip.

:) Thanks, Wolly. The EGG is almost up, no? I'm very risk averse. 

Any other scoop on what those banks are doing would still be appreciated!

Mae, Westpac's official line on the extended guarantee scheme is that they're yet to decide whether to apply for it or not.

As the last paragraph of my story says, however, most of the other banks have now confirmed they won't be participating.

Hi Mae, at this stage come 12 October this year NONE of the NZ trading banks have applied for the extended Government Guarantee.

Some of the finance companies still will have them though.

It is anybodys guess where is the best place to park your funds. Things change so quickly these days, who knows....

whoops....I should read all the comments before I reply!

Thanks for replying! It's helpful. We like holding some Kiwi Dollar as a counterweight to our USDs!

Plus, we are planning on living in NZ again one day!

Thanks Gareth, that's very helpful! Caught me skimming! (The comments are sometimes even more irresistible than the actual articles.)

 

Thanks Iain. Help me out here. What is bank capital? If money is debt and only exists as the asset side of the asset = liability equation, how can "bank capital" be anything other than more debt, maybe more secure, whatever, but still only someone else's liability.

What am I missing?

Iain is upset Kiwidave..he wants the govt to be the bank...the only bank..the one and only polly controlled bank....pollys with ethics ...upstanding citizens without an ounce of greed or envy in their bones....all bullshit and a grand socialist vision at the same time.

Somehow by magic the whole financial system can then be stabilised and kept under the thumb of these good citizens....an end to the concept of a free money market with regulations...no more going down to your local for a loan or to deposit your savings hell no...it would be more like having the socialists as the Godfathers throughout the land..."kiss my ring or no loan".

Wally  bit of an oversimplification there and a tad insulting to Iain....I thought you'd be in a better mood given the rush is back on.

Iain can never be accused of a lack of research ........agree with him or not....it's all eventually

down to interpretation and common accessibility .

It is a choice between having politicians in complete control of the financial system, leaving no room for personal choice and accepting as certain a corrupt mafia like control of your life by the monster that is govt...or having a free financial system that is in constant need of govt regulation to prevent the financial theft of a countries wealth by greedy people with the backroom support of party politics that is democracy.

The fact that govts have proved themselves to be utterly useless at formulating and enforcing high quality financial regulations that prevent the banking corruption...is evidence of what we would face if politicians were in total control of the banks and credit.

At the heart of the issue is whether you should have the legal right to lend your money to someone else. Socialism would say you do not have this right. Capitalism gives you that right.

If you support Iain's endless demand for a public social credit system, you are giving away your right to be free. Even the Cuban communist leadership has started to realise what a stupid system they have forced on the Cuban people for so long.

Wally...while you make .."The Point" again an oversimplified one but nonetheless an

encapsulation with it's merit........I am under no illusion that the interests served by our "freely

elected politicians" are seldom the interests of the wider population..... and so outcomes are

overall similar.

As to any potential for socialist revolution.....in N.Z......pleaaaaase....a snowball in hell would

have better survival odds...... irrespective of MMP /FFP /or other the interests of the few will be

served........ Ad nausium .

When people inject lines of lateral thought...take what you will from it  if only to confirm you

are a free thinker in a "free society"

P.S. Wally.....no I do not support  Iain's objectives if that is of concern to you.....you know full well that I am plumping for full blown Dictatorship with myself..."El Presidente' '" at the helm.

Things are just not going quite my way at the mo.....revolutionary funding it appears... is located under......

Far Too Much Risk  Portfolio's..... among reputable lending institutions. 

We were rather close to that sort of control under Piggy...not sure what that was..some sort of conservative socialism...remember when you had to ask how much you could take out of the country...when govt ran everything. I have no doubt at all that public social credit would bring a return to that madness.

Conservative socialism....or about as close to a Freely Elected Dictatorship thus far...it came with ups and downs for Muldoon.

Upside...likely-hood of being assasinated ..... minimal

Downside..... you can be voted out. 

well worthy of a response KiwiD but you better be in a mood to read when you get it......as they say ...it will be long ....it will be hard....etc.

jeez, Wolly..you're like an idiot child with some of your spurious ravings...they're kinda humourous in a moronic way but when someone like poster Mae above is obviously uncertain about things and is in a foreign country i doubt your dribbled replies to her queries engender a sense of confidence.

you were doing so well for about a day last week....back on the meds for you, i fear?

I ran out of pills!

you said it ,bobby !

and btw..there's no need to imply that wally's intelligence has run out.

go gold!

Christov, reading some of the comments here, I think we can use a number of people in the combating forefront of “Viva the Revolution” (VtR2010). I suggest Wally has good quality to be the leader.

If I read you right Walter.....Wally will need that flack-jacket after all..... 

Exactually ! 

And a fast horse in case something goes wrong.

Yes Walter.... a horse would be fitting for the occasion.... and we shall name Wally's mount

Muldoon's Revenge.....eh ...that ought to put some fear into the hearts of those lilly livered

Susans running the hive.

ooooh this is taking shape now....I'm off to see a man about a ....... 

ooooh this is taking shape now....I'm off to see a man about a ....number of explosive underwear.

Great idea Christov. I’m sure Fidel agrees with that.

 Hariwira rings me this afternoon. He obviously also wants to be in the forefront wearing a flack- jacket and a pair of..............

wants to be in the forefront wearing a flack- jacket and a pair of..............Dirty Dog sunglasses in line with his epithet............chanting..........

I think Hariwira is much more aggressive like that. I would not stand next to him – they could go off any moment.

Thank you Walter..

Note to self.....don't stand next to Hone.....

If you really want safety - diversify.

If you have cash - spread the money around to a few banks.  Keep a months worth of cash under the mattress. Keep some foreign cash (Yen, Franc, Euro, USD)

Better yet -  Pay off debt, Buy Gold, Silver.  Buy next years canned food and dry staples.

The GG is for suckers when there is no guarantee for the value of money.

Not so Gpac...ok the extGG covers just 250K but take a look at the 4 FCs that are running with it...better rates than the banks for shorter term deposits. I agree the govt is destroying the dollar at 30% every ten years...but some people need the cash income. Gold from the Mint should only be a small % of your savings and then you should be taking the gains. You need some fully imputed shares that pay good divs, but buy them in a dip. Property is dangerous ground now as is farmland. Prices remain bloated and can only fall.

Guess I didn't get the memo about only keeping a small percent in gold or silver.  I am soooo bummed with only a 26% gain on one third of my net worth this last year.  Too bad I didn't buy a property or shares to rack up those huge divs instead.

and don't forget Zimbabwean dollar.

Reminds me of the saying about American Banks' Balance Sheets after the GFC.

'There is nothing left on the right side and nothing is right  on the left side'

Reminds me of the saying about American Banks' Balance Sheets after the GFC.

'There is nothing left on the right side and nothing is right  on the left side'

Mae, take your money out of Westpac and put it in with Kiwibank. At least you won't be supporting the aussies banks and the profits will stay in NZ. Much better for the ecomony. Their Notice saver account is great investment option.