With all the news happening around the industry at the moment it sometimes seems a little hard to decide what to focus on.

Over the past week the finance company sector has again dominated the news for a variety of reasons.

One is the government’s not unexpected extension of the guarantee scheme. The other is its announcement on reviewing the rules around moratoria.

Dealing with the second one first it does seem like this is a waste of time. The large majority, if not all, the finance companies which are likely to seek support from their investors for a moratorium, rather than receivership, have wel and truly done so.

It’s unclear to me whether reviewing what has happened is good use of time and resources?

I agree that some of the companies which gained a moratorium arguably should have been put into receivership. However the investors had the choice and the overwhelming majority all voted for the stay of execution.

To me it is little surprise. Human nature indicates that people don’t want to put one of their investments into receivership as it is an admission they made a bad investment. Added to that they are less likely to vote for the big R when an offer of redemption, no matter how good or bad, is put in front of them.

I would add that judging the proposals in today’s environment is not necessarily a reflection of the decision made at the time.

Back to the guarantee scheme. My guess is that the banks will opt out of the guarantee as it won’t stack up on a cost benefit basis.

Banks have been able to reel in millions of term deposit dollars recently and I can’t recall one bank advertising the guarantee as the reason people should invest.

It’s a different story for finance companies. Many have promoted their GG status, and it has helped them enormously.

The big firms will no doubt use the scheme, however it will cost them more as the fee in the new scheme is based on the size of their total book, and not just the amount of money raised after the first GG came into force.

I wonder whether some of the smaller firms will opt in; organisations like credit unions and building societies. My guess is probably not as they haven’t had the same issues as finance companies.

It seems that in this second generation guarantee the rules have been tightened enough to force the much sought after finance company rationalisation to occur.

If this happens and we end up with a strong, well regulated finance company sector, then that is a victory.