The government has made more room for finance company failures, adding $54 million to the amount taxpayers will provide to protect investors under the government's retail deposit guarantee scheme.Treasury's latest accounts for the 11 months to May, releas
The government has made more room for finance company failures, adding $54 million to the amount taxpayers will provide to protect investors under the government’s retail deposit guarantee scheme.
Treasury’s latest accounts for the 11 months to May, released yesterday, reveal total provision under the scheme is now $934 million.
That is made up of $887 million provision for losses it considers “more likely than not” to occur – a $7 million increase from the end of April.
It has also provided $47 million to cover the costs of payments to investors in entities guaranteed under the scheme, which are now in receivership.
The opt-in retail deposit guarantee scheme was set up in October 2008, aiming to ensure ongoing investor confidence in New Zealand’s financial system, in the midst of financial market turbulence.
It is due to expire on October 12, but will then be replaced by the extended Crown retail deposit scheme, until December 31 2001.
Eight finance companies have been approved for the extended scheme so far.
Participating finance companies pay fees to the Government if they hold deposits of more than $5 billion or experience significant annual growth in deposits of more than 10%.
But for other companies with deposits of less than $5 billion, the government now has provision for a net expected loss given default of $887 million, to cover future payments under the scheme after expected recoveries.
As at May 31, 73 financial institutions had joined the scheme and deposits of $133 billion had been guaranteed.
