Finance firm expects tougher rules

Leading finance company Hannover, which has been working with the Government on its review of the sector, believes mandatory ratings and greater disclosure requirements are likely to be adopted.

Hannover chairman Greg Muir said yesterday that his company had been working closely with the Ministry of Economic Development on its review of financial products and providers.

Hannover did not have a credit rating, as "we've been working on the premise that coming out this taskforce may well be a mandated rating regime".

"We support it and are pushing strongly for it," he said.

"If that didn't eventuate then we would have interest in getting ourselves rated by a name agency."

Muir said that in principle, Hannover would normally oppose greater government involvement in everyday commerce. However, "the industry's in a state now where it would be better for public confidence if there was some form of enforced regime".

This week the chief executive of listed finance company Dorchester Pacific, Andrew Walker, added to calls for more rigorous regulation of the sector.

"We are firm believers in a mandatory rating or disclosure-based system to aid investors in judging the financial health of a company," he said.

Given the lack of suitable agencies now operating in New Zealand, Walker said, sharemarket operator NZX could be a contender to supply such services.

Muir and Walker's comments come as finance companies scramble to limit the damage to investor sentiment caused by the recent failures of Provincial Finance and National Finance 2000.

While Hannover was experiencing no problems in sourcing investor funds, "certainly the feeling we're getting from the marketplace is that's not the situation with a number of the other organisations".

Hannover, the country's largest privately owned finance company, yesterday indicated it was likely to post a $55 million pre-tax profit for the June year, up 20 per cent on last year.

Muir said the company, which uses former newsreader Richard Long to promote its debenture stock, usually waited until its results were audited before releasing them.

"But I think because the recent failures and because of speculation in the media, including a couple of negative comments from people running other finance companies, that the industry is taking quite a battering at the moment. "There are some good news stories out there."

Rating coming

* Hannover believes mandatory ratings for finance companies are coming.

* Dorchester Pacific says sharemarket operator NZX may be able to provide that service.