SCF: Labour calls for commission of inquiry


Labour Finance Spokesperson David Cunliffe today called for an independent Commission of Inquiry into the handling of New Zealand's largest ever corporate bailout, South Canterbury Finance.

"There are deeply troubling questions around the SCF debacle only a fully independent public Commission of Inquiry can restore public confidence in the integrity of markets and regulatory processes,” David Cunliffe said

David Cunliffe said there was bipartisan support for the Retail Deposit Guarantee Scheme as a response to the global financial crisis and similar moves in Australia. Labour did not oppose the National Government's decision to include SCF in the RDGS shortly after taking office in 2008.

"Public concern centres on a number of decisions taken by the Government that must underpin the terms of reference of the inquiry.

"First, the decision to allow SCF to trade without substantial constraint or early entry to statutory management must be tested in light of what information was available to the government at the time. Was analysis of all options full and thorough? Was taxpayer liability minimised?

"Second, the decision to place the Hubbards and Aorangi Securities into statutory management may have compromised SCF's ability to meet its obligations. New Zealanders are entitled to know why that decision was made, on advice from whom, and based on what information,” David Cunliffe said.

"Third, on what basis did the Government decide to extend SCF's guarantee on 1 April 2010, when they must have known by then the company was already in deep distress? What alternatives, including statutory management, were considered at that point? Why were more conditions not applied to SCF at that stage?

"Fourth, having decided to allow SCF to pursue a potential recapitalisation strategy under the extended guarantee, why did the Government walk away from a potentially viable recapitalisation deal that may have saved the taxpayer hundreds of millions of dollars in liabilities?

"Fifth, why did the Government pursue an outcome where senior debt holders extracted substantial profits at taxpayer expense while ordinary equity holders were wiped out? Why were moral hazard issues unaddressed in the receivership strategy?

"Sixth, what confidence can the public have that the Government's regulatory institutions acted prudently and transparently, and managed any perceived conflicts of interest appropriately at all times?

"Because these questions go to the heart of the Government's regulatory processes, only a fully independent Commission of Inquiry can provide the public with confidence and restore the reputation and integrity of our financial markets.

"Given the scale, complexity and public interest in this issue, Labour is willing to offer to the Government a bipartisan approach to setting up a full independent public inquiry,” David Cunliffe said.

ENDS

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