Govt's deposit guarantee put to the test

Monday 2nd March 2009

The government's deposit guarantee scheme is set to have its first test-run, as of today.

Mascot Finance will be the first company to test the scheme since its inception in October last year, after the company was placed into liquidation today, owing $70 million to 2,558 investors.

All eligible Mascot investors will get 100% of the money they are entitled to under the crown's scheme, Treasury secretary John Whitehead says.

"The deposit guarantee scheme was put in place to give New Zealand depositors confidence that their money would be secure in the event an approved financial institution failed."

The receivership came after a review of impairments in the Mascot loan book concluded that a major loan was unlikely to be recovered in full. A writedown in the value of that loan would have resulted in a breach of the trust deed and receivership was considered the best option.

Mascot's trustee Perpetual Trust, has appointed Deloitte partners, Brett Chambers and Paul Munro as receivers of the company.

"The receivers and the trustee will be working closely with Mascot management and staff to ensure that, in these difficult times, the best outcome is achieved for all interested parties," Perpetual said in a statement.

Deposits covered by the guarantee include the principal sum deposited, along with interest accruing in accordance with the terms of the deposit up to $1 million per depositor, per institution. Deposits made and interest earned both before and after Mascot's approval are covered.

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