Hide Rodney: Ministerial Statements — South Canterbury Finance—Receivership and Retail Deposit Guarantee Scheme 
Hide Rodney: Ministerial Statements — South Canterbury Finance—Receivership and Retail Deposit Guarantee Scheme 
[Volume:666;Page:13759] 
Hon RODNEY HIDE (Leader—ACT) 
: 
 I rise on behalf of the ACT Party to speak in response to the ministerial statement made by the Minister of Finance the Hon Bill English. The demise of South Canterbury Finance and its subsequent slide into receivership last week came as a great shock to many people throughout the country. South Canterbury Finance was regarded by many as the bedrock of the South Island business community. The significance of the company to New Zealand’s business sector is indicated by the fact that South Canterbury Finance had close to $2 billion in loans out in the rural economy backing farms contractors and small businesses in provincial centres. It is also now clear that South Canterbury Finance had extended its portfolio beyond its traditional base. Accordingly the collapse of South Canterbury Finance has the potential to be felt throughout the New Zealand economy. That is why it is essential the receivership is conducted in an orderly manner. 
The Government’s moves will ensure that it has complete control of South Canterbury Finance’s lending and funding. It is important that we are able to unravel its investments in an orderly value-maximising way so as to reduce the cost to taxpayers. It has also ensured that South Canterbury investors will not have to go through the same ordeal as that experienced by investors in Hanover Finance Strategic Finance and St Laurence. Around 35000 South Canterbury Finance depositors will receive around $1.63 billion of which the Government expects to recover almost $1 billion. The fact is that many good parts of South Canterbury Finance are still trading. It is my understanding that the Government will be working closely with these businesses in an effort to ensure that they can continue to operate as normally as possible. 
The Crown Retail Deposit Guarantee Scheme arose from a unique global financial crisis. The threat was sudden and calamitous shifts of funds by depositors. The scheme was designed at speed by the previous Labour Government to avoid a spiralling series of financial crises with the contagion spreading internationally. That greatly limited the options that the Government then faced. It was always obvious that the scheme created adverse incentives and there was serious risk of the situation being gamed by some participants and by depositors in protected institutions. Those were the risks that the previous Government had to face. On aggregate that Government has been successful in limiting the damage. 
But like many policies it was easier to get into than to get out of. Some financial institutions were already weak when they entered the scheme as a consequence of a period of very low interest rates and in hindsight an excessive appetite for risk. This was a global phenomenon. These financial institutions were further weakened by the global recession the financial crisis and the rush of depositors and investors into low-risk investments. The problem of exiting from the scheme was well understood. It was discussed and it was debated. In September last year the House unanimously moved to extend the retail deposit scheme until the end of 2011. The House unanimously made the trade-off to accept the risk of adverse incentives and potential gaming of the deposit guarantee for a further period in exchange for ensuring broad confidence in our financial institutions. 
Now is not the time to second-guess those decisions made by the House but it is essential that we learn from the experience and are better prepared should we encounter similar situations in the future. Now is the time to review the situation and to learn from what has occurred. Thank you very much.