10. JOHN BOSCAWEN (ACT) Link to this
to the Minister of Finance
Does he have concerns about the operation of the Government’s retail deposit guarantee scheme; if so, what are those concerns?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Government stands behind the retail deposit guarantee scheme, but I am concerned to ensure that it is not putting taxpayers’ money at undue risk. Therefore, I have asked officials to have a look at the scheme to ensure that we are managing the risks taken by the taxpayer, as intended.
Why does the Government’s retail deposit scheme subsidise finance companies, some of which have already gone broke, when the Reserve Bank recommended that finance companies should be charged for the true cost and true risk of the taxpayer guarantee?
In hindsight it is not difficult to see that aspects of the scheme may have been designed in a way that dealt better with the risk that taxpayers were taking. However, I stress that at the time decisions were made—back, I think, in October last year—there was a premium on providing depositors with the kind of guarantee that would prevent a run on finance companies or on a bank, and in the trade-off between getting a guarantee in place and getting it perfect, I think they probably made about as good a decision as they could.