Danger of ‘run’ on all finance firms

By NICK CHURCHOUSE –

The Dominion Post | Saturday, 1 September 2007

A growing panic is creeping into finance company investors, but it is exactly that which will see them lose more money, experts say.

Stories of investors turning up at finance companies to demand their money back are becoming more common, but the financial industry says this will unnecessarily cause more companies to fail.

The flurry of collapses in the past 16 months – seven companies with more than a $1 billion in investor funds between them – has the average investor spinning, unsure who they can trust.

Five Star Finance collapsed on Thursday, owing investors about $50 million.

Merchant banking company Bancorp has issued a report detailing what investors should look for when judging finance companies in the hope investors will get smarter before they get scared away.

Bancorp managing director Craig Brownie said investors were starting to lump all finance companies together as bad news. “That doesn’t make a lot of sense to us.”

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