No grounds to axe SCF guarantee - Treasury

Photo / Sarah Ivey

Treasury is confident there were no grounds to remove South Canterbury Finance from the retail deposit guarantee scheme.

South Canterbury was put into receivership yesterday and the Government immediately paid out $1.7 billion to investors and in a loan to the receivers.

Questions have been raised about whether South Canterbury should have been accepted into the deposit guarantee scheme and blogger Cactus Kate has suggested South Canterbury did not meet all the requirements of its deed of guarantee with the Crown.

Treasury spokesman Angus Barclay told NZPA the Crown had exercised all its powers appropriately to protect its interests as a guarantor.

There were various requirements on companies under the guarantee scheme, he said.

The guarantee could be withdrawn from companies which did not meet those requirements.

"It's not something we do lightly."

The withdrawal would not be retrospective. That means new depositors would not be covered but existing ones would be.

"The guarantee is not revoked it, it is withdrawn for the future," Mr Barclay said.

He said guarantees had been withdrawn from two companies previously - from Viaduct Capital when its actions meant people were covered by the scheme who it was not intended for and another company which paid back all depositors.

In the case of South Canterbury Finance, the Crown exercised its powers appropriately, Mr Barclay said.

nzherald.co.nz readers respond to bail out

The Government's decision to bail out South Canterbury Finance provoked a strong response from nzherald.co.nz readers.

On our Facebook page, most commenters were angry about the bail-out. "Awww @ all those poor people who had invested in SCF boo hoo..anyone would think that someone took a gun to their heads and told them to invest in SCF!!" wrote Mzz Jakzin. "Come on people, that's the risk you take if you want to gamble away your money like that ...and now what... the rest of us kiwis have to pay for their mistakes?"

Aubrey Bairstow said "if people elect to invest their money in high risk ventures such as finance companies then the government should not bail them out. I don't go crying to them when my shares don't perform. This is a disgrace."

Barry Wotten thought it was "just another case of this National Government taking from the poor and giving to the rich", while Daniel Scott asked "So why am I paying for other people's bad investments? It's hard to feel sorry for wealthy people who get ripped off, when the majority of them are doing jack for the community. This government hasn't done anything for the country since it has been elected in, other than service the wealthy."

But not everyone opposed the move.

James Loretan said: "Put it this way, the amount of people in the South Island who are affected by this finance company is massive, if the company went under, a huge amount of the South Island would be affected, people would lose their busineses, their farms, and when you consider that this area is big in dairy, imagine if suddenly everyone had to sell up."

Connal Grace agreed. "The decision to impose Statutory Management on SCF came down to a decision by the SFO, and not the government. Regardless of the government in power, I doubt the outcome would have differed, and SCF would (presumably) still have been put under statutory management... I am not happy with the $405, but as a nation, we'll have to deal with it. So many people want the government to fix everything wrong with the country, but this can't be done for free."

Steven Law said "What about all the poor men, woman, children who have their life savings invested with SCF? I'm sure all of you who have invested money in your banks would expect some intervention if your bank went down? Of course its a bad investment, but what happens if that $1.775b got taken out of our economy?"

- NZ Herald staff, NZPA