Asset Finance, the minnow lender which was temporarily stopped from seeking new investment last year over the representation of a related party loan, has been rapped over the knuckles by the Reserve Bank for breaching the cap on related party lending.
The central bank issued a warning to Whakatane-based Asset Finance for exceeding the 15 per cent limit on related party loans that non-bank deposit takers can make as a proportion of total credit exposures, according to a statement on the Reserve Bank website. The government ordered restrictions on related party lending by second-tier lenders due to the major role they played in the collapse of the finance company sector through the second half of the last decade.
"The requirements that are now in place are vitally important in terms of limiting the harm that can arise from such transactions," the Reserve Bank notice said. "While such harm has not eventuated in the case of Asset Finance Limited, related party exposures can be detrimental to the interests of investors."
A Reserve Bank spokeswoman told BusinessDesk the issue appears to have been resolved and the "Reserve Bank has no reason to believe Asset Finance Limited is not compliant with the legal requirements concerning related party exposures."
Asset Finance had almost $463,000 in related party loans as at September 30, or 11 per cent of share capital at the time. Non-bank deposit takers have to keep related party lending below 15 per cent of share capital minus intangible assets and future tax benefits.
