Combined Building Society, which is the issuer of deposits for the proposed 'Heartland Bank', has been approved by Treasury to participate in the government's extended retail deposit guarantee scheme which runs until December 31 this year.
The creation of Combined Building Society followed the merger of Canterbury Building Society, Southern Cross Building Society and MARAC Finance Limited, which were already in the extended scheme. The merged group is looking to become a registered bank.
Under the extended guarantee, institutions can offer guaranteed and non-guaranteed deposits with guaranteed deposits typically offering lower interest rates due to the costs of the guarantee. Other institutions covered by the extended guarantee are Wairarapa Building Society, Fisher & Paykel Finance and PGG Wrightson Finance.
The extended scheme came into force in October last year when the initial scheme, which began in October 2008, expired. The government has already had to make a payout under the extended scheme, after Equitable Mortgages went into receivership in November owing about NZ$178 million to 6,000 depositors.
Last month Philip Combes, Treasury's deputy secretary of financial operations, said a total of 38,459 depositors in eight failed companies had been paid about NZ$1.83 billion under the initial scheme. The eight guaranteed companies that failed during the initial guarantee period were Mascot Finance, Strata Finance, Vision Securities, Rockforte Finance, Viaduct Capital, Mutual Finance, Allied Nationwide Finance and South Canterbury Finance.
Combes said it was too soon to say what the taxpayer's ultimate tab would be. See more in Gareth Vaughn's December story here.
For more on the extended scheme, see Gareth Vaughn's October story, Low participation in extended Crown guarantee raises questions over whether it's even needed, here.
Here is the release today from Treasury:
The Crown today approved Combined Building Society for participation in the Extended Retail Deposit Guarantee Scheme that runs until 31 December this year. Combined Building Society is successor to the Crown guaranteed obligations of Canterbury Building Society, Southern Cross Building Society and MARAC Finance Limited.
Treasury put out a further release later on Wednesday:
Following approval of Combined Building Society under the Extended Retail Deposit Guarantee Scheme that runs until 31 December this year, the Crown today gave notice to Canterbury Building Society, Southern Cross Building Society and MARAC Finance Limited that it was withdrawing the Crown retail deposit guarantee, effective immediately upon receipt of the notice by the three financial institutions.
Combined Building Society is successor to the Crown guaranteed obligations of Canterbury Building Society, Southern Cross Building Society and MARAC Finance Limited.
The Crown stands fully behind its guarantee commitments. There has been no default event relating to Canterbury Building Society, Southern Cross Building Society and MARAC Finance Limited but there is no longer a practical need to maintain the guarantee for those institutions because all of their Crown guaranteed obligations are now held by Combined Building Society.
(Updates with second Treasury release)
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