September 4th 2009

In 2005 the RBNZ warned the Minister about the finance companies.

Why were the public not warned or informed of the escalating risk of investing in Finance Companies?

The public were not protected even though the RBNZ warned the Minister in 2005.

The Reserve Bank of New Zealand reported in May and November 2005 the following on New Zealand Financial institutions.

RBNZ Financial Stability report, Page 12, May 2005 - copied from PDF www.rbnz.govt.nz/finstab/fsreport/fsr_may2005.pdf/

This chapter reviews New Zealand’s financial institutions.

It focuses mainly on the banking system, but also reviews non-bank saving and lending institutions, and life insurance companies.

This reflects the Bank’s intention to maintain surveillance of the financial system beyond the core banking sector. The Financial Stability Report will examine these and other non-bank sectors, such as funds management, from time to time.

We assess that the main financial institutions currently are well placed to weather less favourable conditions. The four major banks remain institutions with strong balance sheets, good earnings, high credit ratings, and strong owners.

The smaller banks, on the whole, have also been performing well. However, finance companies represent a sectoral risk going forward. With a slowing economy, and a slowing property market in particular, the outlook for these institutions is more challenging.

The life insurance sector, overall, has at least partially recovered from difficulties experienced in the early years of the decade.*

RBNZ Financial Stability report, Page 22, November 2005 - www.rbnz.govt.nz/finstab/fsreport/fsr_nov2005.pdf

New Zealand’s financial institutions remain similarly placed as at the time of the May 2005 Financial Stability Report, although there are some early signs of more testing times ahead.

Banks continue to report strong balance sheets, with satisfactory levels of capital, strong but moderating profits, and a very low level of impaired assets.

This puts the banking system in a strong position going into a period of slower economic growth. Lending growth in the banking sector has continued at a brisk pace, although some signs of a slow–down in lending appear to be emerging.

Lending growth remains faster in the non-bank financial institution (NBFI) sector, continuing the recent trend of increasing market share, particularly for finance companies. Here too, however, some slowing in lending growth appears to be occurring.

Some deterioration in banks’ and NBFIs’ loan asset quality can be expected as the economy slows. The banking sector is well placed to absorb a modest increase in impaired asset expenses. However, parts of the NBFI sector may have more cyclical exposure. For example, lending growth and potential risks in some market segments, such as property development financing, can fluctuate considerably with the economic cycle.

The managed fund and superannuation sectors have displayed little asset growth in recent years. In part, this reflects the relatively poor overseas investment performance in these sectors in the early part of the decade. However, it is also indicative of the low rate of household saving and the high share of household wealth invested in housing.

The Reserve Bank told EUFA representatives in a meeting on 18 December 2007, that they had reported this information to the Minister.

In the meeting with EUFA representatives the Reserve Bank blamed the media for not informing the public about their reports.

Is it the role of the media to protect New Zealanders? Or the Government? If neither, who is responsible for informing the public investors, who rely on professional advisors, advertising, which they believe will inform them of the true position.

EUFA

(Exposing Unacceptable Financial Activities Inc Soc)

www.eufa.co.nz

ENDS

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