Seven guaranteed finance companies seem sound

The New Zealand Treasury has not made any provision for default under the extended retail deposit guarantee scheme, thus suggesting all the seven finance companies currently under the umbrella are sound.

The extended guarantee scheme began on October 12, and following the expiry of the original retail guarantee scheme. The new scheme will wind up at the of December 2011.

The seven companies have guaranteed deposits totalling NZ$2.3 billion. The entities are also allowed to issue non-guaranteed deposits.

Three of the seven entities are under a merger pact aimed ultimately at forming a bank.

The Treasury ended the June 2010 financial year with a provision of NZ$748 million to cover the losses associated with the failure of eight finance companies including South Canterbury Finance which went in to receivership at the end of August.