Treasury says it has all but finished paying out investors in finance companies that collapsed whilst covered by the initial Crown retail deposit guarantee scheme.
Philip Combes, Treasury's deputy secretary of financial operations, said a total of 38,459 depositors in eight failed companies had been paid about NZ$1.83 billion. The eight guaranteed companies that failed during the initial guarantee period were Mascot Finance, Strata Finance, Vision Securities, Rockforte Finance, Viaduct Capital, Mutual Finance, Allied Nationwide Finance and South Canterbury Finance.
Combes said it was too soon to say what the taxpayer's ultimate tab would be.
“The final cost to taxpayers will be lower than the total paid to depositors but will depend on how much is recovered from the firms that triggered the guarantee,” said Combes.
“The companies that defaulted now owe the Crown and the Treasury is seeking to recover money on taxpayers’ behalf."
The initial scheme ran from October 12, 2008 until October 12 this year. It has been replaced by the extended Crown retail deposit guarantee scheme which runs until December 31, 2011. Already one company covered by the extended scheme, Equitable Mortgages, has been placed in receivership with about NZ$178 million owed to 6,000 depositors.
Combes said Treasury expects to start repaying Equitable depositors in the first quarter of 2011. The extended scheme guarantees NZ$2.3 billion worth of investors' deposits and Treasury had not provisioned for any company covered by the new scheme to default.
The other companies accepted into the extended scheme are merger partners Marac Finance, the Southern Cross Building Society and the Canterbury Building Society, plus Fisher & Paykel Finance, PGG Wrightson Finance, and the Wairarapa Building Society.
Read Treasury's statement below:
More than 38,000 depositors have been paid under the original Retail Deposit Guarantee Scheme that expired this year, after the finance companies they invested with defaulted on their obligations.
“The scheme was an emergency measure to ensure confidence at a time when the world’s financial systems were in crisis,” Treasury Deputy Secretary Financial Operations Philip Combes said.
Eight financial institutions defaulted while participating in the scheme, which started in October 2008 and ended on 12 October this year, with taxpayers funding approximately $1.83 billion of repayments.
“The final cost to taxpayers will be lower than the total paid to depositors but will depend on how much is recovered from the firms that triggered the guarantee,” Mr Combes said.
“The companies that defaulted now owe the Crown and the Treasury is seeking to recover money on taxpayers’ behalf,” Mr Combes said.
Payments to depositors with five of the Crown guaranteed financial institutions were completed in late October and payments for depositors with the remaining three were completed last week. Two Viaduct Capital depositors are not yet due for payment because the Trustee for Viaduct Capital chose not to accelerate the maturity date of deposits.
“Approximately 45 depositors (or 0.1% of the 38,600 total) could not be traced using the available address and account information. These depositors are still eligible for approximately $0.1 million worth of payments in total. We know who these depositors are but not how to get in touch with them. I encourage these depositors to call toll-free on 0800-220-010 to provide their address details,” Mr Combes said.
The Treasury expects to start repaying depositors with Equitable Mortgages Limited in the first quarter of 2011. Equitable Mortgages was placed into receivership on 26 November 2010 and eligible depositors holding eligible debt securities issued by Equitable Mortgages will be repaid under the terms of the extended Crown guarantee.