Ministerial Statements — South Canterbury Finance—Receivership and Retail Deposit Guarantee Scheme

I wish to make a ministerial statement under Standing Order 347, in relation to the receivership of South Canterbury Finance and the coverage of depositors by the Crown Retail Deposit Guarantee Scheme. I seek leave for my statement and for the response of the leader of the Labour Party and the co-leaders of the Green Party to be 10-minute speeches, with the other parties to have speeches of up to 5 minutes, and for my reply to be a 5-minute speech.

💬 Mr SPEAKER: Is there any objection to that course of action being followed? There is none.

The deposit guarantee scheme was announced by the previous Government, which set the terms of the guarantee in late 2008 and was supported by the incoming National Government. At that time the turmoil in world financial markets caused many OECD countries to take unprecedented steps to protect their financial systems, including nationalising banks and providing sweeping sovereign guarantees for most financial system deposits. Administration of the scheme was delegated to the Secretary to the Treasury in accordance with policy guidance set by the Minister of Finance. South Canterbury Finance was admitted to the scheme on 19 November 2008. The essential test for admission was whether it appeared necessary or expedient in the public interest. Under the deed of guarantee, participants could take on increased deposits in lending but were required to pay fees in respect of any growth. Allowing participants to continue lending was a major aim of the guarantee scheme.

At the time, South Canterbury Finance appeared sound. In June 2008 Standard and Poor’s had affirmed a stable BBB- credit rating and commented that “asset quality is sound, underpinned by a modest risk appetite, proactive risk management, and sound underwriting standards.” However, this was not necessarily the case. In the 4½ years to December 2008 South Canterbury Finance’s assets had almost doubled from $1.1 billion to $2.16 billion. As 2009 evolved it became clear that much of this additional lending was not high quality. The balance sheet expanded slightly under the guarantee, peaking at $2.35 billion in June 2009. It is clear, however, that the great majority of problem lending occurred prior to entering the guarantee.

In mid-2009 Treasury appointed KordaMentha as advisers to report on the company’s financial position. The June 2009 Crown accounts included a provision of $831 million for the deposit guarantee scheme. The majority of this provision related to South Canterbury Finance. Assessing the potential risk was complicated by related party lending, generally poor credit and accounting processes, and, more recently, the departure of most of the senior management. Despite this deteriorating position South Canterbury Finance remained in compliance with the deed of guarantee, and as such there was no ability or cause for the Crown to withdraw the guarantee. If, for whatever reason, South Canterbury Finance’s deposit guarantee had been withdrawn, existing depositors would still have been covered for the full term, and the Crown’s exposure would have remained.

In September 2009 the Government moved, with unanimous support in the House, to extend the retail deposit guarantee until the end of 2011, though on significantly more restrictive terms than previously. On 1 April 2010, South Canterbury Finance was approved for entry to the extended scheme when it started in October 2010. Its admission into the extended guarantee did not materially change the Government’s risk in the event of default. In the event, because South Canterbury Finance entered receivership before October, the extended guarantee scheme never applied. Payments to depositors will be made under the terms of the original scheme.

During the period of the guarantee, Treasury and its advisers were in close contact with the firm. Once it became apparent that the firm was in difficulty, there were proposals either to acquire parts of the firm or to recapitalise. I instructed Treasury officials to work cooperatively with the firm on these options. However, they all effectively amounted to a bail-out by the Crown, with extra costs and risks to taxpayers. At no stage would Treasury have recommended accepting any of these proposals.

At the request of its directors, South Canterbury Finance was placed in receivership on 31 August. The ultimate cause was insolvency, not lack of liquidity. The Government then moved promptly to ensure that the depositors would be repaid swiftly. As well as repaying $1.6 billion of remaining depositors, the Government extended a loan facility of $175 million to the receivers to ensure prompt repayment of prior charge holders, and extended the guarantee to a small number of previously ineligible depositors. These decisions were taken for commercial reasons. They avoided the need to pay ongoing interest that otherwise would have accrued over many months or years as investors submitted claims, and also the risk that receivership might be controlled by prior charge holders, to the potential disadvantage of the Crown. Treasury estimates that the net saving to the Crown is about $100 million as a result.

The Government’s recent moves ensure that the receivership will be conducted in an orderly fashion that minimises disruption to businesses either financed or owned by South Canterbury Finance. The receivers this week called for expressions of interest from possible buyers of South Canterbury Finance’s assets.

While the Crown has had to make good its guarantee to depositors, it will recover some of the proceeds out of receivership. Once the receivership is finished, this will largely complete the cycle that began in October 2008. When the fees collected from the wholesale and retail guarantee schemes are included, the net cost to taxpayers is likely to be between $300 million and $400 million. Although this cost to taxpayers is considerable, this expenditure did help prevent the potential collapse of the financial system. In the light of ongoing bank bail-outs around the world, this net cost is the insurance premium that our economy has paid to avoid potentially catastrophic losses to taxpayers over the last 18 months.

The Labour Opposition rises to address the important issue of the receivership of South Canterbury Finance and the additional liability that the public of New Zealand now has to the tune, initially, of $1.75 billion. Last Tuesday, 31 August, South Canterbury Finance was placed in receivership, triggering the provisions of the Crown Retail Deposit Guarantee Scheme, under which South Canterbury Finance’s deposit holders are to be paid $1.6 billion. In addition, $175 million is being loaned to the receiver, which will allow the Government to repay all of South Canterbury Finance’s prior ranking debts and become the first-ranking creditor. Once South Canterbury Finance’s assets are sold off, the Government says it expects to make a net loss of about $600 million, which the Minister of Finance argued in the House just previously could be reduced to $300 million to $400 million net of the interest received under the scheme.

This is the largest bail-out in New Zealand corporate history. The events leading up to the receivership raise some serious questions. The public, who are now footing the bill, are entitled to know what went wrong, when and why it went wrong, and who was involved. Kiwis deserve to have clarity and transparency about how the Government and its regulators handled the bail-out, and about whether the cost to the taxpayer was in fact minimised. We are asking these questions so that we can learn the lessons of South Canterbury Finance, and ensure that something like this does not happen again.

A wide range of detailed questions need to be addressed. Firstly, should South Canterbury Finance have been included in the extended guarantee scheme? Did South Canterbury Finance breach its deed of guarantee? On what date did KordaMentha start to advise the Government on South Canterbury Finance? There have been reports that this happened in mid-2009. It was clear that South Canterbury Finance had substantial difficulties, and that some at that point thought it was destined to fail. So what advice did the Government then get from KordaMentha? Did KordaMentha reach the same conclusions as Ernst and Young, who said there were fundamental uncertainties about South Canterbury Finance’s financial position?

Was South Canterbury Finance in breach of the Reserve Bank’s prudential requirements for inclusion in the guarantee scheme when it was accepted for the extended scheme on April Fool’s Day? Given the state of its balance sheet, it must have been. Its half-yearly report, released in April 2010, showed there had been a huge loss. Why did the Government then act as it did? Had Treasury seen South Canterbury Finance’s latest audit accounts when it announced that the finance company would be included in the extended guarantee? Was South Canterbury Finance in breach of the deed of guarantee when it was included in the extended scheme? South Canterbury Finance’s business practices suggest that it may not have been meeting the standards of prudence required by the deed. What, for example, was the level of related party transactions at that time, and how did that relate to the criteria set out in the deed?

Could the Government have tightened the terms of the deed of guarantee under the extended scheme? Could the taxpayers’ liability therefore have been limited in that way? The public of New Zealand will want to know whether the Government did indeed minimise the cost to the taxpayer. How many deposits did South Canterbury Finance attract after its inclusion in the extended guarantee scheme? South Canterbury Finance released—

💬 Rt Hon John Key: These are all very good questions. Shame you didn’t ask them when you did it.

I raise a point of order, Mr Speaker. The Opposition has done the Prime Minister and the Minister of Finance the courtesy, on this serious matter, of listening to their remarks without interruption, and we ask that that courtesy be reciprocated.

💬 Mr SPEAKER: That is not an unreasonable request, as the Opposition did accord the Minister of Finance the courtesy of listening to him in silence. I ask the House to try to avoid interjections, please.

How many deposits did South Canterbury Finance attract after its inclusion in the extended guarantee scheme? It released a prospectus in early April that sought to raise $1.2 billion in registered debentures. The Government’s decision to extend the guarantee gave investors the confidence to make new deposits with South Canterbury Finance, even though the company was already in a bad state.

There have been reports in the media about a potential commercial deal that would have greatly reduced the Crown’s and taxpayer’s liability. Apparently, negotiations ended only at 4.30 a.m. on the night before the receivership was announced. What deals were on the table? Was someone interested in buying a share of equity in South Canterbury Finance, possibly preventing the need for a bail-out? We have heard that reputable parties were willing to invest hundreds of millions of dollars of their own equity. This would have greatly reduced the taxpayer’s liability. Having made the decision to include South Canterbury Finance in the extended guarantee, why did the Government not give Sandy Maier, the chief executive, every chance to recapitalise the company, and why did those negotiations fail at the last moment? What was the sequencing of Cabinet’s consideration of the recapitalisation proposal, relative to the timing of those negotiations? What other options did the Government consider before South Canterbury Finance was put into receivership? It seems that the Government’s moves were pre-planned, given the speed of their implementation. Did the Government really give recapitalisation every chance to succeed?

The Government has said that the minimum cost to the taxpayer could be around $600 million, assuming that the Government can realise the full value of all of South Canterbury Finance’s assets. The Opposition asks whether that cost could, in the end, be more than that. It is clear that assets held in receivership typically erode in value. Faced with the choice between ceasing business as usual as a going concern or being sold to circling speculators at fire-sale prices, what scenarios has the Government planned for the value loss of the assets currently held by the receiver, and how will that loss be minimised?

The Opposition and the public will be interested in the process that the Government went through when it put the House under urgency, without a select committee process, to extend the guarantee scheme. Labour voted for that, and it was passed in September of last year. However, at the time we made the point that the legislation should have gone to a select committee, even if it was only for a compressed period of time. I believe that history has shown that to be a good and proper instinct.

Did putting Allan Hubbard into statutory management exacerbate South Canterbury Finance’s troubles? It is clear that there are matters currently under investigation by the Serious Fraud Office that this House cannot have visibility into. But none the less, on 20 June Minister Power announced that on the advice of the Securities Commission he was placing the Hubbards, Aorangi Securities, and seven charitable trusts under statutory management. Some matters were referred to the Serious Fraud Office. Although South Canterbury Finance was not part of the order, it must have been affected by the loss of confidence in its principal, Allan Hubbard. Because of the statutory management and the ongoing Serious Fraud Office investigations, the public has little information about what led to the Government’s decision. No doubt more will be known when these matters are concluded. But after the announcement my colleague the Hon Lianne Dalziel wrote to Minister Power, expressing her concern that placing Allan Hubbard under statutory management at a time when South Canterbury Finance was trying to raise funds was difficult to understand. Did the Government factor in the situation facing South Canterbury Finance when making the statutory management order? Did the Government consider the effect of the decision on South Canterbury Finance, and the effect on the retail deposit scheme?

Taxpayers will wish to assess who were the eventual winners and losers in this debacle. The Government has loaned $1.75 billion to South Canterbury Finance’s receivers and depositors, which is more than the annual Budget allocation for the New Zealand Police, and even after the assets are sold the Government could be $600 million in the red. The companies who borrowed off South Canterbury Finance will now be struggling, as receivers cut up their credit cards and shut off their credit lines. However, some companies with senior registered debt stand to make a very handsome return from their investments in this process. The public will want to understand more about how those circumstances arose.

Were there any conflicts of interest? Some serious questions need to be asked about the transparency and integrity of the Government’s processes. What assurances did the Government seek that all private parties were free of conflicts of interests? What conflicts of interest were declared to the Government? What steps, if any, were taken to mitigate any conflicts of interests? These are issues that we will examine in more detail as the facts emerge.

To sum up the issues raised so far, the Government stated that its objectives for South Canterbury Finance included minimising the cost to taxpayers, yet it decided to include it within the extended guarantee scheme despite evidence that South Canterbury Finance might already have been in breach of the terms of that scheme. Having made that decision, the Government moved the company into receivership without clearly allowing the recapitalisation process to finish or other options such as statutory management to be explored. Serious questions remain to be answered.

I stand to speak today on the bail-out of South Canterbury Finance. This Parliament has often had the debate about regulation versus non-regulation. That debate has raged back and forth in New Zealand politics and global politics for many years. The side that opposed regulation dominated New Zealand politics through the 1980s and 1990s. That side of policy making, and those who supported a laissez-faire approach, dominated policy making in terms of how we should regulate the finance sector. Today we are witnessing the end result of the victory of a laissez-faire approach to the regulation of the banking and finance sector. Today we should draw the conclusions that those who have advocated very strongly for nearly three decades that we should not regulate the private sector—those who have advocated against the regulation of buildings, for example, or against the regulation of the finance sector—were wrong. The New Zealand public are having to pick up the bill for the cost of the victory of the new right in the debate between those who wanted to regulate the finance sector and the building industry, and those who did not.

At the end of the day the reality was that the finance sector and the banking sector were too big to fail. All of us in this House decided that we needed to support a retail deposit scheme and a wholesale deposit scheme in order to protect the New Zealand economy, because these institutions were too large to fail. Once the institutions were too large to fail, there was little alternative but for the taxpayer to step in when they were in trouble. If the taxpayer has to fork out billions of dollars, or the hundreds of millions of dollars, to bail out finance companies, surely the taxpayer has a right to ensure that those finance companies are run in a way that will not result in the taxpayer being exposed to a massive liability. Surely, once and for all, we should put to bed the idea that we can simply let the finance sector and the building industry and whoever else go ahead unregulated, when the costs to the community and to the Government and taxpayers of New Zealand are measured in the order of billions of dollars. Let us remember that the leaky housing fiasco was a result of a laissez-faire approach to building regulation, and it has cost the country somewhere in the order of $20 billion. The issue we have in front of us, South Canterbury Finance, will cost the country in the order of hundreds of millions of dollars. If the taxpayer and the people of New Zealand are to pick up the tab when these companies fail, surely the taxpayer and the people of New Zealand have a right to regulate them in such a way that they will not expose us to these gigantic failures. For those who have been engaged in this debate back and forth in this House over many years, I say that the verdict is in. The verdict is in front of us right now in this House with this bail-out of South Canterbury Finance.

The next issue I shall raise is the overseas ownership of land, and I would be very interested in the Minister of Finance’s view on this. South Canterbury Finance has Dairy Holdings, which in turn is the owner of large tracts of South Island dairy country. I would be very interested in the Minister’s view about whether the Government can control whether that land falls into foreign ownership during the receivership process and whether the Government has a preference. I assume it does have a preference. If it has a preference, what mechanisms are available to the Government to ensure that these large areas of farmland do not fall into foreign ownership? It is a critical issue that both the Prime Minister and the Minister of Finance have spoken about on numerous occasions.

The third point I make is on what I would call the unsustainable development that South Canterbury Finance was involved in. One of the issues for New Zealand is that not only was it unsustainable financially but also it was unsustainable environmentally. The environmental impact of the great dairy revolution across the South Island of New Zealand, particularly in Canterbury and Southland, has been enormous. The giant dairy revolution has an enormous environmental impact. It is time we learnt the lessons about the sustainability of these kinds of developments not only in financial terms but also in environmental terms. I was recently in Dunsandel. The people of Dunsandel are surrounded by cows from Dairy Holdings, and it has had a big impact on them. There are issues of environmental as well as financial sustainability.

The fourth issue is farming for capital gains. South Canterbury Finance and a large part of the dairy boom have been farming for capital gains. There have been relatively small real returns. The main returns, and the whole system, were based on the idea of capital gains as the value of land went up and up and up. Farming for capital gain is totally unsustainable. If we think we can build a financial system in which the way everyone makes money is through increases to the value of rural land, year on year on year, we are not taking a sustainable approach to financial development. Those who thought we could continue on the dairy boom, which was based on capital gains and the value of farmland, held a completely mistaken belief.

The fifth issue I wish to touch on is the issue of equity. New Zealand taxpayers will be handing over many hundreds of millions of dollars. There is some debate about the figure, but I ask the Government to look at the issue of equity. We all understand the necessity of the Crown Retail Deposit Guarantee Scheme, but while on the one hand we are handing over hundreds of millions of dollars, on the other hand we are penny-pinching right across Government spending, for very small gains. The abolition of night classes, which saved the Government a handful of millions of dollars, has to be seen in the context of a bail-out that has cost the Government and the people of New Zealand hundreds of millions of dollars. There is an issue of equity. When we are bailing out those investors, as I think we all agree we have little choice but to do, we also need to put into context the issue of equity and all the other cuts the Government is making.

Another example involves people who are uninsured in Christchurch right now. The cost of paying out those people who were uninsured would be relatively small in comparison with the cost of these bail-outs of finance companies. Surely when we look at supporting those who are uninsured in Christchurch, as an issue of equity we should look at the cost of this bail-out of South Canterbury Finance.

The first of my last two points relates to the Minister of Finance’s very strong defence of the Government’s role in all of this. To some degree the Minister has attempted to answer Mr Cunliffe’s questions on the role of the Government. But if the Government has nothing to fear, will it support an open inquiry into the question of how all this happened? I am sure that the members of the Finance and Expenditure Committee would be very interested in an open inquiry into the biggest bail-out in New Zealand’s history. If the Government genuinely has nothing to hide, and if it feels that all sides of politics are implicated in this bail-out, will it be open to a Finance and Expenditure Committee inquiry into the bail-out of South Canterbury Finance? That seems to me to be one of the critical issues.

Finally, I can only reiterate what Mr Cunliffe said in terms of the use of parliamentary urgency. Urgency should be used only when it is absolutely essential and the matters being considered are urgent. We put through the renewed Crown Retail Deposit Guarantee Scheme under urgency, and we are now discovering that there are some very big issues associated with that legislation. It would have been much, much better if we had gone through a proper select committee process. I encourage the Minister of Finance to look at that.

I ask the Minister of Finance to address just two issues: whether he will support an inquiry into the bail-out, and what he will do about overseas ownership of the land that was, in effect, owned by South Canterbury Finance.

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 35,000 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.

Kia ora tātau e te Whare. Kua tū ake hei waha kōrero mō te Pāti Māori i tēnei ahiahi.

[Greetings to us, the House. I rise as spokesperson for the Māori Party this afternoon.]

When talking about South Canterbury Finance the Māori Party has been trying to put the payout into some sort of context. As other speakers have alluded to, just over a week ago around 30,000 investors received a taxpayer handout to the effect of $1.6 billion to tide them over after the collapse of Mr and Mrs Allan Hubbard’s finance company, South Canterbury Finance.

Māori have been comparing this unexpected bonus for this one group of investors with the irony of the fiscal envelope offered 15 years ago as part of the grand plan to settle Treaty claims. The fiscal envelope limited the Crown to a total of $1 billion for the settlement of all claims over a period of 10 years. The $1 billion cap to settle all claims for the Māori population, which at the last census totalled 643,977 people, compares miserably with the $1.6 billion payable by the Crown to settle a few unhappy investors. Māori ask why when “Ma” and “Pa” Hubbard go to the cupboard and find nothing there, they will suddenly be bailed out by the Crown, yet when Māori go to the larder it is so much harder and the best they will end up with is approximately 2 percent of the real value of their claims.

Professor Margaret Mutu worked out a formula using the 1995 deal in which a Pākehā landowner, Allan Titford, received $3.25 million in compensation for the 94 acres of far north farmland that was taken off him and returned to Māori. Based on that formula, she said that the settlement paid out to date would equal 0.06 percent of what the claims were actually worth. Ngāi Tahu’s $170 million was 0.01 percent of the $1,192 billion that they would have received under Professor Mutu’s formula, and Tainui’s $170 million equated to 0.4 percent.

We have no argument with the investors. On the contrary, we think the South Canterbury Finance experience provides a benchmark from which to assess the financial compensation due to Māori from Treaty settlements. Let us put it all in context: just over $1 billion to Māori, of whom there are just over 650,000; $1.6 billion to 30,000 investors; and $2 billion to Christchurch and the Canterbury area, which they will definitely need. The figures here are seriously out of kilter. Tēnā tātou.

Many questions can be asked about the circumstances that led to South Canterbury Finance going into voluntary receivership—the insolvency that the Minister of Finance referred to in his statement—and they will require answers over the next little while. But there comes a time in events like this where, essentially, a dose of pragmatism has to prevail.

The parallel that I want to draw to the House’s attention, because it was similar in magnitude, was the decision that the previous Labour Government faced over the future of Air New Zealand. A number of questions could have been asked at that time about whether the bail-out was appropriate—[Interruption]—and about the circumstances that gave rise to it, but the fundamental point was—[Interruption] I ask the member to be patient. The fundamental point was there was no credible alternative at that time to the action taken in the broader national interest. I think that is the parallel that needs to be applied in this particular case. The consequences of allowing South Canterbury Finance to fall over without the guarantee being exercised—without providing the assistance that is being made available—would have been far more catastrophic and significant than the cost of enabling the company to continue trading.

So I think the decision is the correct one, on those grounds alone. What comes out in the wash of time about the circumstances that gave rise to the commercial decisions that led to the company being placed in the position that it was are for the future to reveal, and appropriate action should follow accordingly. But it was appropriate in this instance, based on the parallel of previous circumstances, for the Government to act in the way that it did and for it to act as prudently as it did.

I thank the various party leaders who have spoken on this matter. Taxpayers will, of course, want a lot of questions answered and I am sure that in due course they all will be, one way or another.

Firstly, it is timely to remind ourselves that the original objective of the Crown Retail Deposit Guarantee Scheme was financial stability at a time when there was real concern, right around the developed world, about the meltdown of financial systems. Secondly, compared with almost every other jurisdiction, except for Canada and Australia, our position coming through that threat to financial stability is remarkably good. In Australia and Canada, as far as I am aware, there have been a few payouts on the guarantees; in every other country billions of dollars have been paid out. I draw attention to Ireland, which is an economy of somewhat similar size to ours. While we are debating a cost somewhere between $300 million and $600 million on this deposit guarantee, Ireland is debating the recent injection of €26 billion into its main bank, which it has now decided it will wind down.

We should remind ourselves that the deposit guarantee covered depositors, not the company. South Canterbury Finance has not been bailed out; the company has failed. Shareholders have lost all their money and preference shareholders have lost all their money. South Canterbury Finance is in receivership; it has not been bailed out. The depositors will be paid out, in line with the intentions of this Parliament back in 2008.

Another point to re-emphasise is simply that South Canterbury Finance depositors have been paid out under the original 2008 deposit guarantee, not the extended deposit guarantee. The extended guarantee comes into place on 13 October. Under the original guarantee there were some 70 institutions; under the extended guarantee there are likely to be seven institutions. So the scope of the guarantee has narrowed quite significantly.

Another point that was raised was the connection between decisions on statutory management of South Canterbury Finance. Those decisions were made by the Government quite separately from one another, as they should be. Some have suggested that the Crown should have used its statutory powers to favour itself ahead of other investors. That, of course, would be unacceptable. It would be unacceptable for the Crown to make decisions using its statutory powers to minimise the deposit guarantee exposure at a cost to other investors who were involved under the Crown statutory management. In that respect, the Crown has conducted itself with integrity, as it should have done.

This guarantee has fulfilled the original objectives set for it of financial stability. In working through the receivership, the Government is fulfilling its objectives of ensuring, firstly, that depositors are paid out; secondly, that they are paid out at minimal cost to the taxpayer; and, thirdly, that they are paid out with minimal disruption to the wider economy.

Of course, we hope that this will never happen again; we hope that a global financial crisis will never happen again. In many respects we should be grateful that, by and large, our financial system remained stable and that Parliament is pressing ahead, on a pretty much bipartisan basis, with reregulating our financial sector to ensure that the chances of this happening again are minimal.