FE Investments told regulators on Tuesday about imminent failure. Photo / Greg Bowker
FE Investments told regulators on Tuesday about imminent failure. Photo / Greg Bowker
The Reserve Bank is working with those involved with an Auckland-headquartered financier's receivership, having been told earlier this week of the imminent failure of the business with $54.3 million of funds.
A Reserve Bank spokesman said FE Investments told it on Tuesday it didn't have enough money to pay itsdepositors.
"On March 31, FEI wrote to Trustees Executors and the Reserve Bank to advise that it would breach its regulatory ratios and would stop making payments to depositors. This advice triggered an event of default under the trust deed," the spokesman said.
Receivership was announced yesterday, leaving worried depositors wondering how much money they would recover.
The Reserve Bank recognised yesterday's receivership announcement was "distressing" for those connected with the FE Investments, headquartered in Chorus House on Wyndham St.
"We are aware of the situation and we are working closely with the trustee supervisor and the Financial Markets Authority," the Reserve Bank spokesman said.
New Zealand's financial system was sound, with strong capital and liquidity buffers. But he said institution failures were also a feature of a competitive business environment.
"Investments always have an element of risk and sometimes these risks materialise. We have been monitoring the situation with FEI for some time and the risks posed to the company were apparent prior to the Covid-19 outbreak," the spokesman said.
The company faced uncertainty over some large investments in property developments and a technology company, he said.
FEI was a small non-bank deposit-taker finance company which yesterday announced it had been placed into receivership, he noted.
FE Investments loaned money for a hotel project at 201 Hobson St, Auckland. Photo / Google Maps
As New Zealand's regulator of non-bank financiers like FE Investment, the Reserve Bank was the authority that licensed such entities, he said.
It also prescribed minimum prudential regulatory requirements, monitored compliance by trustees and the non-bank entities with regulatory requirements and liaised with the Financial Markets Authority on performance, he said.
FEI's Australian parent company, ASX Listed FE Investments Group, was downgraded by the ratings agency S&P from BB in October to CCC in December.
S&P defines a CCC rating to be an investment of a speculative nature and vulnerable to non-payment.
FEI withdrew its product disclosure statement in February and stopped accepting deposits or issuing debt securities.
Deposits were secured against the company's assets and payments to depositors would depend on the value the receivers could realise from the business and its assets, the Reserve Bank spokesman said.
"The Reserve Bank continues to monitor developments in the financial sector and is ready to act to ensure markets, financial institutions, and the financial system operate in a stable and efficient manner," he said.
Neale Jackson, one of two KordaMentha receivers, said it was too early to say how much money depositors would get.
Those with loans have been told to continuing paying, while those with deposits have not had their interest payments.
One man with hundreds of thousands of dollars with the business contacted the Herald yesterday to express distress about the situation. Another person said their parents, aged in their 70s, had money with the business and the family was extremely upset and worried.
