Viaduct Capital dropped from bank guarantee scheme

The Crown has dropped Viaduct Capital, a company associated with former Blue Chip executive Nick Wevers, from its retail deposit guarantee scheme.

The Crown guarantee has been withdrawn on all new deposits after delivery of the withdrawal notice to Viaduct yesterday, a Treasury statement said. Eligible deposits up to the date of withdrawal continue to be covered. The Treasury said Viaduct had not failed and there had been no event of default under the guarantee.

The retail deposit guarantee scheme was criticised when Mascot Finance collapsed shortly after joining.

Banks which support the deposit scheme via levies have been privately critical of the support of non-bank institutions. Banks are not seen as needing retail deposit insurance generally but they benefit from wholesale deposit insurance, which helps them raise funds in volatile overseas markets.

In withdrawing the guarantee for Viaduct Capital, the Crown cited clauses of the Guarantee Deed preventing the effective benefit of the guarantee going to unintended persons or matters inconsistent with the intentions of the Crown in entering into the guarantee. It did not elaborate.

Meanwhile, Viaduct Capital said it would continue to operate its business.

"Viaduct Capital is extremely surprised and disappointed at the actions of the Crown," it said in a statement issued late yesterday. "The company intends to pursue further with the Crown the reasons for its decision."

Viaduct Capital was formerly known as Priority Finance. Its chief executive Nick Wevers was managing director of Blue Chip for a short period in 2004. He left after a disagreement with the board over Blue Chip's direction and management practices.

Wevers, through companies controlled by him, is a shareholder of Viaduct Capital.

- NZPA