Cunliffe David: Questions for Oral Answer — Questions to Ministers 
Cunliffe David: Questions for Oral Answer — Questions to Ministers 
[Volume:666;Page:13769] 
4. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
 to the  
Minister of Finance 
: Did the Government minimise the cost to the taxpayer of the bail-out of South Canterbury Finance; if so how? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 First of all I make it clear that the taxpayer has not bailed out South Canterbury Finance. The taxpayer is paying out depositors according to a guarantee offered to those depositors in October 2008. This payout was well signalled through provisions to the public accounts and we have taken at least one step to minimise cost to the taxpayer—that is to make quick payments to all depositors which is estimated to save about $100 million. Of course the more important step is still ahead of us—that is a receiver recovering the maximum value possible from the remaining assets of South Canterbury Finance. 
Hon David Cunliffe 
: What advice did the Minister receive from KordaMentha relating to South Canterbury Finance’s financial condition prior to approving the extension of the Crown Retail Deposit Guarantee Scheme? 
Hon BILL ENGLISH 
: I would need to look at what advice was received; I would not want to misrepresent it or partially represent it to the member. I make a couple of points. One is that Treasury was delegated the responsibility of administering the scheme. That was part of the original set-up agreed between the parties in Parliament and the Minister of Finance at the time. We have stuck pretty much to that process where Treasury has made the operational decisions about the guarantee. My view is that regardless of whatever advice or decisions the Government made South Canterbury Finance’s problems were so significant by mid-2009 that despite ongoing efforts to give it the best possible chance to survive and incur no cost to the taxpayer those efforts failed. 
Hon David Cunliffe 
: Was he concerned about the level of related party transactions and the earlier growth in South Canterbury Finance’s loan book; if so what measures were put in place at what time to deal with those issues? 
Hon BILL ENGLISH 
: The great thing about hindsight is it is never too late to use it. Concerns grew through 2009 that South Canterbury Finance was not as strong and robust as had been represented. The Crown at least came to the conclusion that there was a problem; in the 2009 accounts we put aside a provision of $830 million in the event that the deposit guarantee was triggered. That $830 million was based largely on an assessment of the risks to the Crown should South Canterbury Finance fail. A product of both KordaMentha advice and Treasury’s own views at least by the middle of 2009 was that there was a risk that it would fail. 
Peseta Sam Lotu-Iiga 
: How large has the failure of deposit-taking institutions been and what are the prospects for improvement? 
Hon BILL ENGLISH 
: Unfortunately South Canterbury Finance’s failure is just one of a number. I refer members to an analysis published on interest.co.nz which lists 61 finance industry failures with total deposits of $8.5 billion that have been either in receivership or in moratorium since May 2006. Of those institutions 47 failed before the guarantee scheme was introduced in 2008. There were 73 institutions covered by the guarantee and as I think I indicated to Parliament earlier the extended guarantee from 13 October will now cover around seven or eight institutions and obviously a much smaller potential liability. 
Dr Russel Norman 
: How will he ensure that farmland held or controlled by South Canterbury Finance does not fall into overseas ownership? 
Hon BILL ENGLISH 
: In the first place if there was any transaction involving potential overseas ownership of those farms it would be dealt with by the existing Overseas Investment Act which the member’s party had a hand in writing when it was redone in 2005. Secondly because of the way the receivership has been structured the Crown is able to exert significant influence over any initial decisions abut how that land might be sold. I might say that the Government is in no hurry. 
Hon David Cunliffe 
: On what date did Cabinet agree to the bail-out package he implemented on 31 August 2010? 
Hon BILL ENGLISH 
: Again I would prefer to check the record. From what I can recollect—after what seems to have been a very long week or 10 days—Cabinet’s decision on the package was made right at the last minute through either a Cabinet meeting or a group of Ministers with delegated power. As the member will be aware because it has been publicly stated the company itself was negotiating right up until the last minute and certainly it was our desire that it was able to be recapitalised by the private sector thereby enabling the company to continue and thereby preventing the Crown having to meet any obligation to depositors. 
Hon David Cunliffe 
: Having extended South Canterbury Finance’s guarantee in order to seek a potential recapitalisation solution why did the Government not agree to a potential recapitalisation deal that could have released South Canterbury Finance from its guarantees at potentially much lower cost to taxpayers than is now expected? 
Hon BILL ENGLISH 
: I think if such a deal from a credible source had been put before the Government we certainly would have considered it. That did not happen. There is much speculation about what different people have said or might have offered but at no stage was there a deal before the Government that had the support of Treasury that met those criteria.