'Heartland' bank accepted into guarantee scheme

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Combined Building Society, which is the issuer of deposits for the proposed 'Heartland Bank', has been approved by Treasury to participate in the government's extended retail deposit guarantee scheme which runs until December 31 this year.

The creation of Combined Building Society followed the merger of Canterbury Building Society, Southern Cross Building Society and MARAC Finance Limited, which were already in the extended scheme.

The merged group is looking to become a registered bank.

Under the extended guarantee, institutions can offer guaranteed and non-guaranteed deposits with guaranteed deposits typically offering lower interest rates due to the costs of the guarantee.

Other institutions covered by the extended guarantee are Wairarapa Building Society, Fisher & Paykel Finance and PGG Wrightson Finance.

The extended scheme came into force in October last year when the initial scheme, which began in October 2008, expired.

The government has already had to make a payout under the extended scheme, after Equitable Mortgages went into receivership in November owing about NZ$178 million to 6,000 depositors.

Last month Philip Combes, Treasury's deputy secretary of financial operations, said a total of 38,459 depositors in eight failed companies had been paid about NZ$1.83 billion under the initial scheme.

The eight guaranteed companies that failed during the initial guarantee period were Mascot Finance, Strata Finance, Vision Securities, Rockforte Finance, Viaduct Capital, Mutual Finance, Allied Nationwide Finance and South Canterbury Finance.

Combes said it was too soon to say what the taxpayer's ultimate tab for the initial scheme would be.

- interest.co.nz