Liquidity pressures and regulation will cause more fin coy failures
Looming liquidity pressures stemming from the end of the government's retail deposit guarantee and the imposition of tougher regulations later this year will cause more finance companies to collapse this year, according to Standard & Poor's.
Friday, June 4th 2010, 5:01AM
by Paul McBeth
Peter Sikora, S&P director of financial institutions ratings, says "we're going to see more (finance company) failures, quite frankly," which are in a tougher situation than savings institutions as they face tougher barriers to the extended government guarantee and may struggle to meet their repayments when they fall due with the initial government scheme expiring in October.
"Five percent of single-rated B firms will default," Sikora said. "The stress will continue in the finance company space."
Five of 31 non-bank deposit takers with credit ratings have a B+ or lower rating, according to the Reserve Bank website.
If financiers manage to survive this liquidity pressure, they then have to contend with tougher regulations from the Reserve Bank, and that impact on earnings will see lenders either struggle to meet repayments to investors, or call it a day when the new capital adequacy, governance, related party, and eventually liquidity, rules come into effect, Sikora said.
Sikora predicts there will be regional consolidation of building societies and credit unions this year as companies band together to meet the Reserve Bank's prudential requirements, while finance companies will have to change their business models to operate successfully in the new environment.
Paul is a staff writer for Good Returns based in Wellington.
| « F&P Finance roll over rates rise as big debenture maturity looms | News Round Up » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
