The Reserve Bank and Treasury's expectations of significant further finance company failures increased rapidly during the three months to September, the Government's recent financial statements show.
The figures reveal Treasury set aside a further $47 million over the period in provisioning to cover claims under the Retail Deposit Guarantee it
expects "more likely than not" will be made over the next 11 months.
On top of the $816 million previously advised in the previous quarter's financial statements, this takes to $863 million total claims the Treasury is expecting from depositors with funds in entities with less than $5 billion each in deposits that it expects will fail.
This month the Reserve Bank said the Treasury's figures were prepared with information about the non-bank deposit-taking sector it had supplied.
The Treasury said the provision represented "a best estimate of likely loss".
"A significant range of outcomes are possible under the scheme in terms of which entities may default and the eventual loss to the Crown following an event of default.
"This reflects the significant uncertainty as to the value that can be realised from an entity's assets following an event of default."
The provisions are limited to the present Retail Deposit Scheme introduced in October last year which ends in October 2010.
