Posts Tagged ‘new zealand’

June 18th, 2009

3 Comments

New Zealand: Small Business crying out for Microfinance

Following on from the news about Kiva moving into the US small business market, fleet footed Ben Kepes calls us to action in New Zealand.

Small businesses in NZ have seen no relief from high interest rates in the recent lowering of rates here. At the same time credit is hard to come by and many business owners have resorted to credit cards to keep their businesses going.

This is a troublesome state of affairs given its the productive economy that has to earn the dollars to pay back the humungous debt necklace hanging around the necks of Kiwis.

So what’s the state of play with microfinance at the moment? Well Kiva is going great guns. It’s really tapped into people’s desire to help and be generous in giving but created this new joy of creating and empowering change for people. It connects people together and that personal touch pulls the punters in.

The more tradtional p2p lending services are not finding life so easy. Charis Palmer reports here on recent developments citing problems for Prosper in the US and some success for Zopa in the UK. Locally Peermint has fallen by the wayside, Nexx hasn’t really got going and Lending Hub has joined a busy Australian market.

So there’s no shortage of platforms but it’s proving harder than expected to deliver the business. But there seems to be no platform for small businesses to secure funding. This is certainly an opportunity as there is certainly a strong and established market on the borrowing side with appropriate forms of due diligence available.

The major stumbling block for p2p start ups has been compliance with various regulatory authorities. However there may be ways around this and with politicians supportive of the small business sector the time may have come for a serious attempt to create what would be a mini-corporate bond market funded by the retail investement market direct.

Now that sounds like a major step forward in building a more productive economy.

May 14th, 2009

Leave a comment

Community Currency Conference: Report

As I couldn’t attend this conference I made a contribution for 3 others to go instead. Here is their report on the event:

From India Whitehouse:

“I’d been moved to attend this event for a number of reasons. My passion is human relationships, understanding self and other and the ways in which we as humans can learn to live together in a way that is sustainable, respectful and congruent with our deepest values and real needs. Tuning into our real needs, caring for each other, and respecting our connectedness with the environment, each other, our differences and the possibility of how diverse and magical our world can be if we aim to live in this way is what motivates and greatly challenges me!

My interest in the economic crisis peaked when my partner and I attended a workshop on mutual credit systems by Christoph Hensch (if you are interested google Understanding Zero). This system takes away the middle man (or the banker) by enabling people to recognise that we have what we need without needing to rely on a third agent to take our money! This whole system is about the relationships between people. A person will either be in dedication to the community due to having consumed before giving or recognition having given to the community before consuming. The key is that each person needs to stay at zero (consuming and providing in equal measure) for the system to stay in balance. The system does however require a mature population who can provide and consume in equal measure. It also requires respect for the individual contributions that people can make and holds the potential for society to reassess some of the values that have got us into hot water (for example valuing money over relationships) and live more equally. What appealed to me most about this system is that relationships are central and the individual strengths of people are encouraged and valued enabling people to consider how they can provide and what they consume from a more empowered position.

After the workshop my partner explained to me how the economic system was unsustainable and depended on a growing economy. I fully understood for the first time that we cannot eat money. This realisation was viscerally moving and I realised at a gut level the urgency and necessity for change.

Having understood this concept and attended this workshop on the economy in which human relationships were the essential ingredients my interest was peaked. When my partner showed my the flier for the currencies conference I made the decision to go based on my experience at Christophe’s workshop, the conversation about money with my partner and an energy test (whereby I tune in to my body and sense my energy going up or down). This is a technique that I learned on an energy awareness training course (www.energyawareness.org) that is changing my life. I use it to make as many decisions about my life as I possibly can. The premise is that my body has the answers to all my current questions I just need to be quiet enough in my mind to tune in. When I refer to human need this is how I define it: a personal individual requirement based on that persons’ body awareness (determined by an energy test) that restores energy to their system (and thus life) rather than depleting it. On reflection this is a sustainable system of living, to make decisions that add life to life rather than deplete it. Another way of looking at it is making decisions that are resonant with your deepest values, core values, or values of your spirit. This way of life is more than just tuning into my needs but includes acceptance of every situation and person including myself, service, attention to the present, energy exercises, and harnessing energies in the world to empower me (other techniques!) and is certainly taking a lot of practise! It is about getting into the flow of my life by tuning into my body which is always showing me what I need. The more I follow its answers the more my life is opening and leading me in new and extraordinary directions that have a lot to do with the people I am meeting!

The community currencies weekend exemplifies this opening up and was an experience I feel blessed to have had.

I arrived at Wellington airport bright and early and had a great conversation with another woman who I was driving to the conference with. Flying is unsustainable to the mind but my need to go to the conference required the flight and I will be using what I learned in the conference to put back the energy I used in flying in other ways. Body energy testing often conflicts with the minds beliefs! We waited at the airport for 2 other friends (Christophe being one of them) and piled into the car. The atmosphere was one of expectancy and vitality. There was a definite buzz in the car and a sense that we were attending an event of significance. We chatted on the way up about community, relationships, meaning and human needs. A major question for me around the economic crisis has been what do humans really need to feel fulfilled? What really makes our lives meaningful? Viktor Frankl reports studies that indicate that woman respects most woman’s resolve in the face of adversity, ability to weather life’s storms with grace and dignity and choose ones attitude in any given set of circumstances, choose ones own way. When humans really dig deep for the answers to what they value, success and riches fall way down the list and it is our capacity for love, respect and the ability to rise above human suffering and grow beyond ourselves that we each honour most. Perhaps this crisis is giving us the opportunity to practise these aspects of humanity? For those who tend to be irresponsible their need might be to take more responsibility (if they develop the intent to see it is so), for those who take to give a little more, for those who give before themselves to put themselves first for a bit). I also have a sense that if we each as humans could transform the energies that limit us (e.g. self doubt and reality avoidance) and start doing the things we deeply love and need to do, (for some this might be art, others medicine,) the global crisis might gradually resolve itself as the illusory need for more would fade under the real need of creating and loving, the experience of being a small part of a greater whole and the true personal fulfilment that would ensue.

Anyway, back to the conference! We arrived on a bright sunny day to a welcoming pacifist community with undulating fields and a pond and a hilly forest behind it. People started to arrive and I became aware of my shyness. I tended to want to withdraw and meditate but my energy (tuning into my body again!) guided me to talk to others, so I did. One of the speakers mentioned that at these conferences often the best work gets done in the tea breaks and I heartily agree! I met some wonderful people and shared experiences about life, social networks and personal meanings that were magical. There were surprises and coincidences as a friend arrived who I’d met through e-mail months before (sharing a project I’d completed). I met a fellow Brit who brightened my weekend no end as we talked of relationships, life and had fun. I also met 2 people I felt greatly connected to (1 of whom is at uni in Christchurch). We spoke of family, following our hearts, and the destiny of each person to be guided by their true needs so that we start to flow as a society. The man I met spoke of a weekend he spent with friends that was based around a gift economy. Nothing is expected in return by the person serving another. He spoke of how well this economy worked, that things tended to get done, some people felt like making supper, others needed to sit and chat and then the roles would change. He spoke of how fulfilling it was to give with no expectation of anything in return. Imagine living in a society where money didn’t exist and we trusted enough to know that all our needs would be met because we knew deep down that we are all reflections of each other, and did to others as we would want done to ourselves!

We gathered on the first evening to introduce ourselves. The meeting began with a Maori welcoming chant that gave gratitude to the systems that had brought us together, the water ways, the mountains, and thanks to the creator. This Maori song encapsulated the energy of the event for me. It was realistic, presenting stark facts about the reality we faced but grateful for everything we had. I felt energised by the community feel of the event and the greeting and gratitude of the Maori chant was unifying. There was an atmosphere of fun but knowledge that we were there to work. This lack of separation between work and play (that it is all life and needs to be taken seriously in a light hearted way) is what I aspire to.

Introductions were unique and heart felt. An elderly member of the group reminded us in a comical way that we had faced similar economic strife before and a Maori woman spoke powerfully about her desire to take her learnings back to Maori communities and of the wisdom within the Maori traditions that white New Zealanders can learn from. An English man Marcus spoke when asked of the 2 ways in which New Zealand might change its ways of the opportunities that European settlers have not taken to respect Maori traditions and the transport system “it’s a @#$%ing mess”, this was met with uproarious laughter.

People spoke of their bartering systems and LETS systems (alternative currencies) and Thomas Greco (the key speaker was introduced) the uplifting tone of the event was set.

We arose early on Saturday morning to a muesli and yoghurt breakfast (the food was glorious), coffee and chats, and made our way to the first lecture. Thomas Greco spoke first about the unsustainability of the current economic system. The core of his speech centred around the fact that bankers lend money (that is not yet in circulation) relying on the fact that people will then earn the money and pay them back with interest. In essence people are creating the money and the bankers are taking money from the earnings of the people based on the trust between people and bankers. Bankers are the middle man. For me the whole conference illustrated that bankers are not needed in the way they are currently thought. If there were no interest rates and we exchanged goods and services for their intrinsic value the devaluation of money would not be an issue and the economic crisis resolve. But because of the massive distribution of wealth, those that perceive themselves to be at the top of the chain (earning lots) are not readily going to give up their “wealth” for the greater good. This talk sparked my interest because it is human values that are at the centre of this. As a society we tend to place great value on success and material riches and yet evidence show that depression and suicide rates are highest in the so called “richest” countries, e.g. the US. In order to enable people to more easily release notions that riches create happiness it seems we need as a human race to reflect on our deepest values, what really makes us shine. Thomas Greco raised the issue that money creates an agreed numeric value of the price of good and services. We face a dilemma about how we value goods if we do away with the money system. Having chatted with my friend Ivan about this, I realised that on a large scale this is an issue. However, within communities, Christoph and Dave (friends who set up the green dollar system in Christchurch) found that people easily come to mutual agreements about the value of goods and services. At a personal level we have the power, through our relationships and combination of skills to create a system that is independent from the current economic system. We do not need to do away with the current system but rather work in synchrony with it. I feel that if people are not so concerned about paying back huge mortgages, the freedom to choose how people spend their time creatively enlarges. For me money does not bring me happiness but rather the way I spend my time (which results in money). Success and money are a by product of my choice to engage my energy in a career, relationships and creative pursuits that nurture my soul. The most exciting part of the community currencies conference was that I sensed passion and heartfelt choices being enabled because people were taking power back from a system that we have all been slaves to. Money was less the objective in LETS systems and bartering systems. The relationships between people and the ways that we choose to spend our time seem to be of the essence in the alternative systems. This is the need which I think humans have been intending to meet for some time- the need for human connection and personally resonant creative pursuits.

Talks continued through out Saturday. Helen Dew presented a talk on printed money (alternative currency). The money was beautiful, and would not devalue due to being attached to goods and services of intrinsic value within the system. Bryan Innes talked of interest free currency. Deirdre Kent spoke of healthy money, healthy planet, clarifying that the economic system is widening the gap between the rich and the poor and valuing money over people. I fully resonate with this notion for when money is the prime pursuit the value of human life and relationship is overridden. For me the economic system is a reflection of this misplacement of values and a revision of our values paramount. The quote by Alice Walker “We cannot afford to close our hearts to even one child crying at this time” comes to mind. The way we treat our children and our human brothers and sisters is a reflection of the needs we are ignoring in our own selves. Peter Russell spoke of OOBIE (Out of Our Back Yards) the notion that we have what we need close to home and we need to share it! This was based on his experience of Karen Russell’s (his mother’s) bartering system started in the 80s recession and highlighted that we really can make this work by being creative and making use of what we have. The power of co-operatives highlighted that the banking system can work if we work in partnership with banks and have each others interests at heart (a great model for life!).

The current economic system reflects our misplaced values and unequal society. As Gandhi states “we need to be the change we want to see”. For me the most important path to a sustainable economy and future is to start acting in ways that are congruent with our deepest values and take things a step at a time. This is the journey of a life time. The conference refocused my intent. I am attending a sustainability course. My main aim is to continue in my life to follow my heart and invest my energy in being the change I want to see by transforming my personal stress burden (this is as moment to moment as accepting my life, not getting angry with my partner, transforming my judgemental thinking and relaxing into the flow and sometimes guiding others to do the same). I feel that if one by one we begin to respect difference, and transform our stresses into wisdom this crisis can be an opportunity to begin to live in ways that deep down we all dream of. The conference strengthened my resolve and clarified my deepest values about life being about relationship (including with myself). I was reminded that my own challenges: the difficulties I face in accepting myself, all those I meet and not succumbing to the forces in me that do not want me to grow keep me humble. It is easy to see the problem as being out there in others but we are all individually mini societies with similar conflicts, difficulties and dark and light forces. We are each responsible for changing ourselves in the ways we each need to, in fact those are the only changes we can make. The conference fuelled my strength to continue struggling to transform my stress, practise being the change I want to see and guiding others to do the same in my work- coming from the humble position of greatly struggling to be the change I want to see.

I am returning to this piece having attended an event called “Awakening the dreamer” last night. It was a look at the effects of using too many resources on nature, wildlife and humans. The core theme was about lack of respect for human life. Racism, gender inequality, and lack of respect for nature are rife. White privilege and “the right not to know” about poverty, abuse and the damage to our environment were addressed. The many unconscious assumptions we hold about who we are and the consequences of what we do are creating an unsustainable reality. On reflection, in order to truly value and respect human life my journey is to learn how to truly love and value those closest to me. In fact we receive what we each most need to learn, “life is bigger than all of us and will give us exactly the opportunities we need to grow” Stephen Kane. But “To reject them is an act of wilful blindness and hubris and will simply cause them to repeat until we finally understand that part of our lives” Stephen Kane. It can seem overwhelming and too much to consider the whole of humanity and is sometimes easier to give money to a charity than truly respect and value those closest to us. I continue to struggle with the tendency to react and judge in my closest relationships and will probably need to practise till my last breath being least harmful to those with whom I am in daily contact and closest to within my daily life. For it is in my closest relationships that my saboteurs and the energies within me that limit my potential to love are reflected. I need to pay close attention in order to practise true love!”

From Raven Gooding:

“The weekend before last I attended the Living Economies conference on complimentary currencies in Whanganui. I found the conference to be a vibrant and exciting event that taught me a lot about the problems with the current money system and the viable community alternatives that are up and running in Aotearoa New Zealand. The conference provided talks by a variety of different people that covered everything from the LETS trading scheme to time banking.

Of particular interest to me were the bartering schemes. Karen Russell of Australia talked about the Australian Barter Directory which was set up at the start of the last recession. For me this was one of the most inspiring ideas at the conference as it demonstrated a simple-ish yet highly effective way to establish an alternative to mainstream currencies. I say simple-ish because it was obvious that production of the book based directory every three months was time consuming and not as simple as it may at first seem!

We were also shown a video clip which showed the ways in which the community was interacting and trading skills, produce and crafts through this directory. I think this was the best way to show the success of the project as the community was interacting, communicating and getting to know each other. I can only imagine that this sort of community “development” has incalculable positive impacts on the general well being of those people involved.

In addition to this presentation, Peter Russell also talked about the OOOOBY network which has started up through the Ning social networking tool. OOOOBY which stands for “Out Of Our Own Back Yards” is an internet based site for gardeners and producers to network and make links that will facilitate the trade of home grown produce. This seemed an ingenious idea to me as it somewhat solves the problems that were associated with producing and distributing a paper directory while maintaining the spirit of the original barter exchange.

I think that all the alternatives that were presented at the conference are inspiring and will be influential in shaping our communities in the next few decades. I know I for one am more motivated than ever to set up a comparable bartering system where I live so that I can meet new people, learn new things and exchange my crafts!

Overall the main thing I got out of the conference was that these currencies are useful in counteracting the current financial situation but their impacts go far beyond creating another “currency”. The biggest impact that I saw was not about what was traded or how much was traded and exchanged but the way people became involved in their communities and how they became empowered to create the community that they wanted and needed”

From Anneleise Hall:

Over 100 people from all over New Zealand attended the recent three-day Community Currencies Conference held in Whanganui, where representatives from many local complementary currency initiatives shared their stories.

Organised by Living Economies, the national body to promote community currencies, the conference featured a full programme of speakers with a facilitated open-space segment on the last day for people to have deeper conversations about topics they were interested in.

It is heartening to see such a range of innovative local projects from around the country reflecting the needs of their communities. Through local currency and bartering systems we are able to create empowerment and resilience in communities by enabling the trading of goods and services without relying on the national money system.

As the central money system is crumbling, and Governments around the world pour billions of taxpayers money into trying to prop up what is essentially an unsustainable and unjust system, the grass-roots response is typically innovative, passionate and practical.

Special overseas guests were Tom Greco from the US, author of “The End of Money and the Future of Civilization”, who talked about why the current interest-focused money system is not sustainable and Noe Vincent Atutur from Vanuatu who spoke on indigenous shell currencies common in their islands.

Project Lyttelton chairwoman Margaret Jefferies presented on Lyttelton’s Time Bank which generated a lot of interest and enthusiasm.

Based on the work of Edgar S Cahn, Lyttelton has piloted New Zealand’s first TimeBank. Many communities are watching Lyttelton with interest.

The principle of TimeBank is very simple 1=1. That is one hour of your time is equal to an hour of another person’s time. Under NZ tax rules, members cannot trade skills they use for their paid employment, so it starts to get people thinking about what other skills they have to offer.

It may be a hobby, a passion or skills that help to make up the 40% of non-market economy work that holds our communities together, such as cooking, caring, raising children, working bees, listening or civic participation. It starts to shift thinking that we are defined by “what we do” or our ability to contribute to GDP.

TimeBank is more than just a trading system. It is a way of building relationships and trust and for people to have their needs met from within their community. It also encourages local production and enables people to benefit from non-market skills and talent.

Trades are recorded on special software and members are able to publish offers and requests. People are also connected through the TimeBank co-ordinator who helps people identify the skills they would like to share and what they would like help with, and explains the software.

Project Lyttelton is regularly doing presentations and answering enquiries from other communities interested in starting their own TimeBanks.

Local complementary currencies work well alongside the national system.

Particularly inspiring was a presentation by Hellen Swales from Upper Hutt who has developed a local XCard.

This is accepted by participating local retailers and works like a Fly Buys type initiative where people who use the card get bonus points that are credited and accumulate until they are able to exchange them for goods or services. It has revitalised the local economy by encouraging people to use local retailers and the data collected to date shows the scheme has been very successful.

One of the most rewarding things about the conference was the wonderful conversations and exchanges of ideas. People attending were really excited about the possibilities.

An exciting development was a system of creating interest free loans within a community, the Genuine Wealth System. In essence, it is a scheme where a group of like-minded people pool their savings into a holding account where the balance is used to provide interest free loans to members of the group. These loans can be used for anything from buying a car, retrofitting houses, to building a house.

The group prioritises who will do what when and the loan is made. The repayments consist of an agreed affordable amount which is made up of a portion of loan balance and an equivalent portion of compulsory savings which are then able to be loaned to someone else for the duration of the loan term. The compulsory savings may be withdrawn when the loan is repaid.

It really harnesses the power of working collectively.

I believe that while the global challenges facing us at this time are unprecedented, by working together collectively and creatively our capacity to meet and overcome them is infinite. This conference certainly reinforced that view.

COMMUNITY CURRENCIES CONFERENCE APRIL 17-18-19 2009, WANGANUI

The Goals of the conference:

1) to maximise public exposure to the concepts of Complementary Currencies and other economic instruments as a solution to the current financial and economic crisis

2) to offer a nurturing networking environment for people, initiatives, community groups and others who work on community-based solutions like Transition Towns (TT’s) and CC’s, etc. sharing ideas, energy and encouragement

3) to produce resource materials from the information shared at the conference, to be made available to the conference participants, political decision makers and the public at large

4) to explore new and/or emerging opportunities for complementary currencies and other economic instruments

An  exciting addition to the conference will be the attendance of high school and university students that people from some regions are sponsoring to attend.

Updates and additional Information about the conference will be circulated leading up to the event by email and on www.sustainablewhanganui.org.nz

May 14th, 2009

3 Comments

Beyond Money: The Growth of Community Currency

Last month Tom Greco appeared as the keynote speaker at the national Community Currencies Conference in Wanganui. He is well known globally for his work on the topic of money. He described his attendance at the conference below

“The national Community Currencies Conference (April 17-19) brought together well over 100 enthusiastic participants who convened at the Quaker Settlement in Wanganui to share information and discuss new possibilities. My Keynote presentation delivered on Saturday morning (April 18) was titled, Reclaiming The Credit Commons: The Key to Sustainability and Relocalization. Prefaced with a brief outline of my vision of societal metamorphosis, I argued that liberating the exchange process from monopoly control by means of localization and popularization of credit is a necessary prerequisite to achieving a steady-state economy and the devolution of power to local communities”.

He also gave talks in Auckland entitled Money, Power, Democracy, and War: Finding the path toward global peace, harmony, and prosperity, on Waiheke Island entitled Community Economic Development: A Comprehensive and Innovative Approach and in Wellington entitledThe Political Money System: The Story of Central Banks, Inflation, and Legal Tender.

He was also interviewed by Kim Hill and that is available here

If anyone is interested in getting copies of those talks you can contact Tom through his website or blog.

I provided sponsorship for 3 people to attend the conference and they have written about their experience of the event in the following post.

October 20th, 2008

Leave a comment

Kiwibank: Its all ours

New Zealand is fortunate to have its own state backed (sort of) bank in Kiwibank. Promoted by Jim Anderton (who quietly understands the money system) it has come centre stage in the recent financial crisis.

With its NZ Post guarantee it had attracted huge funds from worried savers over the last 12 months. Now that all bank deposits have been guaranteed it is perhaps less attractive. Until today.

Winston Peters, the enfant terrible of NZ Politics, today proposed that Kiwibank handle all government business.

What a great idea. Why continue to pipe $4lbn odd in profits to the Australian banks?

Having domestic control of your monetary system is an absolute prerequisite for a properly functioning sovereign state.

Colonial invaders always replaced the local currency with theirs as soon as local administration was in place. Currency issuance is all about control.

If someone else is in charge of your money then you have limited control over the functioning of your economy.

I suggested in June 07 that the RB use the opportunity of the high NZ$ to buy as much foreign currency as possible whilst the market was hungry for NZ assets. Now with the NZ$ around 0.60 and our overseas borrowing binge fully exposed, the situation is less than favourable.

The lessons of Iceland show that sovereign control of the money supply is essential and as part of that a strong domestic banking system is a necessity.

October 14th, 2008

4 Comments

Nationalise money not banks

The flurry of raised hands for bank guarantees from central bankers and treasury ministers around the world fails to convince me we are out of fire. Certainly guaranteeing interbank lending is helpful as the pipes are well and truly frozen in that part of the monetary world.

The global banking system has now been underwritten, guaranteed and in some cases nationalised completely. There is no surprise in that course of action as it was all they could do. Whether they take stakes in, takeover or buy preferred stock makes no difference. Now they have bought some time we will have to wait and see how it pans out. The underlying problem remains the same though.

They have not addressed the difference between money and credit.

Money is what the sovereign authority issues. This carries no interest burden which is a future claim on goods and services yet to be produced i.e. drives the growth imperative.

Credit is what banks issue based on deposits and “other types of capital” that are in the bank. This carries interest. Credit makes up 97% of the money supply. Credit is treated as money although laws are very clear that only sovereign authorities can create money.

Confused?

There is a strong argument to say that bank credit is fraudulent money. I digress.

Instead of supporting the credit creation system we need to support the money creation system. It’s that simple. Let me be clear: banks do not lend out your deposits. They use your deposits as collateral on new loans.

Take Kiva, my favorite microfinance outfit: I deposit $25, find a borrower and lend them the money. My $25 is gone and i have to wait for it to be repaid. That is true lending. Think of it as investment.

Bank lending is garbage.

The answer is to nationalise the supply of money and remove the interest burden at the point of creation. I think this is likely to happen at some point as governments run into difficulties with their guarantee schemes.

We will need a new monetary authority who will issue new money into the economy and monitor the supply of money in the economy at any given time.

Only then will we be able to build a genuinely productive and healthy society and economy.

October 12th, 2008

Leave a comment

Details on NZ Deposit Guarantee Scheme

Some details from the RBNZ:

12 October 2008

OPERATIONAL DETAILS

New Zealand Deposit Guarantee Scheme

This document outlines the key characteristics of the deposit guarantee scheme announced by the Minister of Finance this afternoon.  Draft contracts containing the full details of the guarantee will be available on the Reserve Bank’s website later this evening.

The Offer
Under the terms of the Public Finance Act, the Crown will invite eligible institutions to enter a guarantee of their deposit liabilities. Eligible financial institutions, will be New Zealand registered banks and non bank deposit-taking financial institutions, who are fully compliant with the requirements of their trust deeds.

The decision to enter a guarantee with any specific institution, whether now or in the future, will be at the sole discretion of the Crown.

Which deposits will be covered?
For New Zealand incorporated registered banks deposits from both residents or
non-residents, will be covered.

For non bank deposit takers and for the unincorporated branches of overseas entities only deposits of New Zealand citizens and New Zealand tax residents will be covered.

Deposit liabilities will be covered regardless of the currency in which they are denominated.

Deposits and other liabilities owed to financial institutions, whether in NZ or offshore, are explicitly excluded from this guarantee.

How long will the guarantee last?
The guarantee will be offered for a term of two years.

Fees
The government will charge a fee for any guarantee offered on amounts in excess of $5 billion.

For covered liabilities in excess of $5 billion a fee of 10 basis points per anum will be charged for the guarantee.  The fee will be charged on the basis of the total covered liabilities, in excess of $5 billion of the institution.

What will trigger the exercise of the guarantee?
The Crown will make payment in the event of the liquidation of a guaranteed financial institution, if its assets are shown to be insufficient to meet the liabilities covered by this guarantee.

Administration
These guarantees will be offered and administered by the Treasury.

Further Information
For institutions wanting further information on their eligibility for this guarantee please contact the Reserve Bank on: 021 682 757.

________________________________________

DEPOSIT GUARANTEE SCHEME

Q & A

12 October 2008

What is a deposit guarantee scheme?

It is a facility where the Crown guarantees people who have deposits with institutions in the scheme.  It covers all retail deposits of participating New Zealand-registered banks, and retail deposits by locals in non-bank deposit-taking entities. This would include building societies, credit unions and deposit-taking finance companies.

It only covers deposits and other debt securities.

What is “retail”?

Deposits by anyone other than financial institutions (eg banks and non-bank deposit-takers themselves)

What will it cost?

The scheme will be free for institutions with total retail deposits under $5 billion.  A fee of ten basis points per annum will be charged on total deposits above $5 billion. This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.

There is no direct fee for individuals, but institutions will determine if and how the costs of the scheme are passed on

What is the cost to the Crown?

This obviously depends on the degree (if any) to which it is drawn on (like any insurance scheme).  Any guarantees will be recorded as
unquantified, contingent liabilities of the Crown.

Why was the facility announced this afternoon? What precipitated it?

The government has moved today to ensure ongoing depositer confidence in
New Zealand given the international financial market turbulence.   The
New Zealand banking system remains sound.  This move is to give further assurance to New Zealanders that their deposits are safe.  It follows other measures that have been undertaken by the Reserve Bank in recent weeks to ensure the liquidity of the banking system.

Why has this been done without legislation?

Parliament is not sitting, and therefore legislation can’t be introduced.  However, the Minister has powers under the Public Finance Act to act in this way.

Does this apply to non-banks / finance companies?

Yes it does, inasmuch as they meet the criteria (above).  Customers should check with their institution to confirm whether they are going to seek cover.

It does not apply retrospectively.

What about non-residents?

For branches of overseas banks and non-bank deposit-takers, non-residents will not be covered.

Is this scheme comparable with the facility announced in Australia
today?   What about other jurisdictions?

From what we’ve seen, the schemes are different - but both are aimed at encouraging confidence

Where can I go for more information?

Individual customers should talk with their banks or non-bank institutions.

About

I’m a Londoner who moved to Christchurch, New Zealand in 2002. After studying economics and finance at Manchester University and a couple of years of backpacking, I ended up working in the financial markets in London. I traded the global financial markets on behalf of investment banks for 11 years. I write about the intersection of economic, social and environmental issues . My prime interest is in designing better systems to create a better world. I welcome comments and input.

Follow me on

 

Twitter

Blog archives