Guarantees finished

The long suffering taxpayer sees a little bit less risk now that the Crown Deposit Guarantee scheme has finished:

Taxpayers have paid out more than $1.9 billion, with the lion’s share going to South Canterbury Finance investors.

Nine finance houses failed under the Crown guarantee. The final cost to taxpayers will be less than the total paid to depositors covered by the scheme, but that depends on how much is recovered from the firms that triggered the guarantee.

The original deposit guarantee was introduced in late 2008 at the height of the global financial crisis, when the world’s banking systems froze up. The government brought in the guarantee as an emergency measure to maintain confidence in the New Zealand banking system.

The original scheme covered deposits of $133b in 72 banks and finance groups. The government ended up on the hook for more than $1.8b, to more than 38,000 depositors in the original scheme.

While South Canterbury was the biggest collapse, the original scheme also bailed out depositors in a handful of failed finance companies, including Allied Nationwide, Mascot Finance and Vision Securities.

That scheme expired in October 2010 and was replaced with a much smaller, extended deposit guarantee, covering seven institutions and $1.9b.

 


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  • Symgardiner

    Fantastic news. The scheme should never been implemented. $1.9b later hopefully people will have realized this.

  • Guest

    And when Fuckstick Finance goes under in the next couple of months, expect Mana, the Greens and Labour to say “Oh, perhaps we should step in since the investors were unlucky here and the guarantee expired. It was always a ‘moving feast’ rather than a contract set in stone etc etc etc.

  • Thank god that New Zealand did not have a major bank go under. I was in Ireland when the banks were guaranteed, we were assured they were solvent – famous last words. Two Institutions have now failed and many more have had to be bailed out at tax payer expense. 

    The stupid thing was Ireland guaranteed all bonds and thus compounded the problem the Irish Government was having. People were very happy to see an Irish banker being arrested. 

    The deposit guarantee was a good thing for NZ banks but it was foolishness to cover the finance companies. People just put money into dogy schemes. 

    Overseas deposit guarantees are quite common but there is one major difference, they have a limit on coverage, thus ensuring that the tax payer does not pay to much (although I believe that the NZ had a $1 million limit)

  • Paul Rain

    So who didn’t put funds in South Canterbury Finance or one of the others after the scheme was announced? You snooze, you lose :P

  • Paulus

    Helen Clark/Michael Cullen only did it as an election bribe (which did not work) and to keep up with Australia who did it for the same reason (and it did work).

  • Apolonia

    AMI never had a guarantee and is still getting hundreds of millions from our inept finance minister.

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