NZ extends retail deposit guarantee

       The New Zealand government has extended its retail deposit guarantee scheme until the end of 2011,Finance Minister Bill English said yesterday.
       He said the scheme, which was introduced last year at the height of financial market turmoil, was still needed despite the worst of the crisis having passed.
       "The planned extension will help maintain confidence in New Zealand's financial institutions while achieving an orderly exit from the scheme," English said.
       He also said taxpayers had already paid out around NZ$68 million (US$47 million) under the guarantee scheme after problems at one or two small finance companies.
       The current scheme was due to expire in mid-October next year. It would now continue until Dec 312011, but with changes applying from the original expiry date.
       Among the changes are the setting the maximum claim per individual to NZ$500,000(US$342,000) for bank customers and NZ$250,000 for non-bank institutions. The previous limit was NZ$1 million regardless of which type of institution.
       Also financial institutions not rated BB or higher by credit ratings agencies will no longer be covered by the scheme.
       "The announcement strikes the right balance between the need for stability in the financial market, certainty for investors and institutions about where the government is heading with the guarantee and also the risk to the taxpayers,"English said.
       The scheme, which all of New Zealand's major banks and most of its nonbank finance companies have signed up to, is open to all retail deposits provided by banks and non-bank deposit takers.
       Over the past two years New Zealand's NZ$18 billion non-finance sector has seen at least 25 companies collapse or seek to restructure deposits with more than NZ$5 billion owed to investors.
       A similar scheme covering wholesale deposits was also introduced last November to support lending between banks.