End of retail deposit guarantee threatens fin coy liquidity: RBNZ

In its financial stability report, the central bank said it expects finance companies that were not able to attract the government's extension to the guarantee scheme may struggle to attract new funds and meet the large share of maturities falling due before the October expiry.

Only five finance companies have been accepted into the accepted scheme: Marac, South Canterbury Finance, Equitable, PGG Wrightson Finance and Fisher & Paykel Finance.

"Liquidity in the deposit-taking finance company sector has been very low, partly reflecting the difficulty some firms have had in retaining deposits," the report said. "Finance companies that are unable to utilities the extension may encounter difficulties if investor confidence is not rebuilt in the coming months."

The central bank joins accounting firm KPMG and rating agency Standard & Poor's in flagging the expiry of the initial crown guarantee as a threat to the viability of companies in the sector. All three agencies predict there will be a bout of consolidation as firms struggle to meet their liquidity requirements and the new prudential rules to boost their capital levels.