Government moves to tighten scrutiny of the $16 billion finance company sector are being slated as “too little too late” – as yet another firm faces trouble.
The suspension of trading yesterday in shares of the Christchurch-based Property Finance Group, which holds $80 million in fixed-term debentures from about 4000 investors, follows the Government’s announcement of interim measures while it tries to speed up the introduction of mandatory credit ratings for finance companies.
A survey last year by accountancy company KPMG of 49 finance companies – each with portfolios of more than $50 million – found that only 11 had opened their books to scrutiny by ratings agencies, a situation the Government aims to rectify by 2010.
The sector has grown to a quarter of the size of this country’s stock market, in which $65 billion is invested, compared with $83 billion controlled by the established trading banks.
There is a growing fear of the fallout on the economy as a crisis of confidence in the sector escalates.