Treasury rejects autopsy on South Canterbury Finance collapse

Free audio stream, including stories that are padlocked on our site. Listen on any device, anywhere. Updated twice daily. The audio stream takes several seconds to start on Android devices.

Launch Radio player

The Treasury hasn't analysed its dealings with South Canterbury Finance or formally reviewed the lessons learned from the retail deposit guarantee, which is expected to cost the taxpayer as much as $1.1 billion, despite the Auditor-General recommending that course of action.

The government's financial adviser chose not to document its analysis and thinking around its dealings with South Canterbury Finance or carry out a formal post-project review of the scheme, according to an Auditor-General's progress update on the Treasury's response to the 2011 report.

The Treasury took that path because it considered many of the risks when the guarantee was extended in 2009, there are fewer non-bank deposit takers of the same size, the unique nature of the scheme limited the extent lessons could be applied in future, and specific lessons were covered by its trans-Tasman banking council and financial stability initiatives.

The Treasury did respond to the Auditor-General's recommendations to set up project planning and monitoring frameworks when approaching crisis management planning, citing the response to AMI Insurance after the Christchurch earthquakes as an example of how it had lifted its game.

"The Treasury has seriously considered the lessons learned in various ways from both the global financial crisis in general and the scheme in particular," the Auditor-General update said. "Applying these lessons should help the Treasury to manage future situations involving distressed institutions."

The scheme, which was set up in the dying days of the previous administration in response to the global financial crisis in 2008, offered depositors a government guarantee that they would be repaid. Nine finance companies called on the scheme with total payments of about $2 billion, the biggest of which was South Canterbury Finance.

The Auditor-General's 2011 report deemed the deposit guarantee scheme was successful in staving off bank failure, but criticised the Treasury for not being more proactive to minimise the cost to the taxpayer.

When the report was released, Treasury Secretary Gabriel Makhlouf rejected the assertion the department was too hands-off, saying they couldn't find a case where intervention was more likely to achieve a better outcome.

The progress update found the Treasury has put in place arrangements with the Reserve Bank, is working with its Australian counterpart and improved project management to protect national financial stability.

(BusinessDesk)


Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

NZ Market Snapshot

Forex

Sym Price Change
USD 0.6377 -0.0081 -1.25%
AUD 0.8934 -0.0104 -1.15%
EUR 0.5658 -0.0105 -1.82%
GBP 0.4141 -0.0049 -1.17%
HKD 4.9424 -0.0632 -1.26%
JPY 77.0680 -1.2440 -1.59%

Commods

Commodity Price Change Time
Gold Index 1134.7 1.380 2015-08-31T00:
Oil Brent 54.1 4.100 2015-08-31T00:
Oil Nymex 49.2 3.980 2015-08-31T00:
Silver Index 14.6 0.040 2015-08-31T00:

Indices

Symbol Open High Last %
NZX 50 5656.2 5664.2 5656.2 -0.65%
NASDAQ 4798.7 4824.6 4828.3 -1.07%
DAX 10201.0 10273.5 10298.5 -0.38%
DJI 16632.0 16632.0 16643.0 -0.69%
FTSE 6192.0 6247.9 6192.0 0.90%
HKSE 21692.8 21692.8 21670.6 -0.47%
NI225 18763.7 18777.5 18890.5 -1.86%