KEY POINTS:
Bridgecorp's collapse has fuelled calls for faster implementation of new regulations for finance companies.
The new rules, announced last month, mean finance companies will require mandatory credit ratings from a reputable international agency such as Standard & Poor's.
Also, the Securities Commission will have oversight of the trustee
companies that act as the sector's frontline regulators and the Reserve Bank will handle registration and prudential regulation.
However, the new regime is not scheduled to take effect until 2010.
Andrew Walker, chief executive of listed finance company Dorchester Pacific, said the failure of Bridgecorp would lead to further questions about the sector's governance transparency and quality of the sector's governance, "and that's a good outcome".
While those issues and more stringent regulation of financial advisers were addressed by the new rules, "I think we'll see that get accelerated and it's not a bad thing".
Standard & Poor's director of corporate and government ratings, Gavin Gunning, said Bridgecorp's demise was "a major wake-up call" for the sector and notable because it had happened during favourable economic conditions.
"Coupled with the failures of three other finance companies, these events are an unequivocal red flag signalling that reforms need to occur within the industry as a matter of priority if more investors are not to lose out when the economic cycle turns."
Commerce Minister Lianne Dalziel was unwilling to comment on Bridgecorp until she had seen the receiver's report but said: "It's not something I would think we'd have to adjust the timetable for but I never rule anything out before being confronted with facts."
Gunning said Standard & Poor's had noted accelerating initiatives by finance companies to strengthen their businesses in anticipation of the new rules. While the agency viewed those initiatives favourably, "they are yet to be fully implemented and have not been tested in an economic downturn".
Meanwhile, it has emerged that Bridgecorp's Australian arm transferred A$3.5 million ($3.8 million) to its struggling New Zealand operation in recent weeks.
The Australian parent company and eight subsidiaries including Bridgecorp Finance were placed in receivership on Wednesday, two days after the New Zealand arm.
Bridgecorp Finance at one point had up to A$150 million worth of debenture stock and capital notes on issue, but was last year barred from raising new funds and ordered to repay its investors by the Australian Investment and Securities Commission (ASIC). It is now believed to owe about A$24.5 million to 1000 investors.
It is understood to have total debts of A$32 million and potentially realisable assets of A$43 million although almost half of that consists of loans to other Bridgecorp companies and the recently transferred A$3.5 million.
Last year Bridgecorp revealed its New Zealand operations had supported those in Australia to the tune of $52.1 million.
