Moratoria slow-death for finance companies rather than quick: Diplock

Speaking at Parliament's Commerce Committee, Diplock said investors are too optimistic about the prospect of regaining lost money and have been easily led to accept putting a company into moratorium when receivership would be a better option.

"I think that investors are often very optimistic and reluctant to crystallise the loss even in their own mind," Diplock said. "They want to hear the company will somehow get back to life."

The regulator was scathing on the prospects for most finance companies operating in moratoria, saying the proposals are "usually the slow-death of the company rather than the quick death of the company."

Still, Diplock would not want to remove the option from distressed firms altogether, as there are some that can survive long enough to trade their way out of trouble.