Govt's retail guarantee scheme to be audited

Bill English. Photo / Doug Sherring

Auditor-General Lyn Provost is to review the Government's Retail Deposit Guarantee Scheme which ended this week having paid out $1.85 billion to investors in failed finance companies.

The move is confirmation of Provost's recently signalled intention to carry out a "performance audit" of the scheme which was set up to maintain confidence in New Zealand's financial institutions during the depths of the global financial crisis two years ago.

Finance Minister Bill English said the audit would include an assessment of how effectively and efficiently the Treasury had identified and monitored the risks to the Crown posed by financial institutions covered by the scheme, including South Canterbury Finance.

South Canterbury's failure last month triggered a $1.6 billion call on the scheme and therefore an independent audit was "timely and appropriate", English said.

The scheme was a big commitment for the Government.

"We've had to pay out a lot of money on it and I think it is good for the public interest that the Auditor-General as an independent party looks at the decisions that were made and the processes that were followed.

"This is certainly preferable to some kind of ill-defined and politically motivated inquiry, which opposition parties called for in the days following South Canterbury Finance's collapse."

However, although Labour leader Phil Goff said he welcomed the audit, his party was not entirely satisfied its concerns around South Canterbury Finance would be addressed.

"There's $1.6 billion of taxpayers' money tied up with this. That sort of money merits a full investigation but the Auditor-General's inquiry is a step in the right direction."

The audit will investigate how well the scheme had met its objectives, explain its purpose and functions to the public and Parliament and identify improvements that could be made to future schemes.

The guarantee ended on Monday and has been superseded by a new one which covers fewer institutions and has tougher qualifying criteria.

Provost is expected to present her report to Parliament by the end of June next year.

Meanwhile, English confirmed the Treasury will later this week publish a large number of documents related to South Canterbury Finance, its membership of the Retail Deposit Guarantee and events leading to its receivership in late August.