Crown Guarantee Schemes: Crown Deposit Guarantee Scheme and Crown Wholesale Guarantee Facility
The Government provides two guarantee schemes in relation to financial institution deposits: the DGS and the WGF. Information on the Government's exposure as a result of these schemes, the management of these exposures and the impact of these schemes is detailed below.
Crown Deposit Guarantee Scheme
The Government operates an opt-in Retail Deposit Guarantee Scheme for financial institution deposits. On 12 October 2010 the original retail deposit guarantee scheme expired. The Extended Retail Deposit Guarantee Scheme commenced on 12 October 2010, immediately upon expiry of the previous scheme and will expire on 31 December 2011. The extended scheme has tightened eligibility criteria and additional limitations on coverage of the Scheme. The Crown guarantee is limited to those entities participating in the extended scheme and excludes deposits accepted by participating entities without the benefit of the guarantee.
As at 30 June 2011, four financial institutions were actively participating in the extended scheme with deposits totalling $1.500 billion covered by the guarantee. This is the maximum exposure and does not include any offset resulting from the recovery of the remaining assets of these financial institutions in the event the guarantee is called upon. The Crown assesses the risk of default by the entities participating in the extended scheme to be unlikely and, therefore, as at 30 June 2011 no provision is considered necessary in relation to the amount guaranteed by the Crown under the extended guarantee.
As at 30 June 2011, nine entities guaranteed under DGS had been placed into receivership; eight of these entities were guaranteed under the original DGS and one under the extended guarantee scheme. The Crown has met its obligations to depositors under the original scheme, the residual obligations under the extended scheme are recognised as liabilities and its rights of recovery from the receivers are recognised as assets (see note on receivables).
| 2010 Actual $000 |
Summary of Crown Deposit Guarantee Scheme Disclosures in the Supplementary Schedules - Non-departmental | 2011 Actual $000 |
2011 Mains $000 |
2011 Supps $000 |
|---|---|---|---|---|
| - | Schedule of Expenses - Grossing up[7] of Deposit Guarantee Payments (page 96) | (1,140,500) | (19,000) | (1,204,500) |
| - | Schedule of Expenses - Receivable Revaluation (page 96) | 236,436 | - | - |
| Statement of Expenditure and Appropriations - Payments in Respect of Guarantees and Indemnities (page 97) | ||||
| 43,357 |
|
1,187,761 | - | 1,549,116 |
| (68,000) |
|
(2,000) | 19,000 | (2,000) |
| Total Reconciles to Retail Deposit Guarantee Scheme Expenses in Financial Statements of the Government for the Year Ended 30 June 2011 | 281,697 | - | 342,616 | |
| - | Statement of Expenditure and Appropriations - Additional Payments to Facilitate Full Payout under the Crown Retail Deposit Guarantee Scheme (page 97) | 150,000 | - | 150,000 |
| - | Statement of Expenditure and Appropriations - Loan in Respect to Guarantees and Indemnities for the Crown Retail Deposit Guarantee Scheme (page 98) | 175,000 | - | 175,000 |
New appropriations
To reduce the fiscal costs under DGS, two new appropriations were approved during 2010/11 in relation to the default of SCF. A secured loan of $175 million was made to the receivers to remove prior charge holders (see page 98). This has been repaid in full and appears in the Schedule of Capital Receipts (see page 101). Interest was also received and is included under Interest from Investments (see page 100). The second new appropriation of $150 million was required to facilitate a full payout to SCF, in order to reduce interest payable (see page 97).
| 2010 Actual $000 |
Summary of Crown Deposit Guarantee Scheme Disclosures in the Supplementary Schedules - Non-departmental | 2011 Actual $000 |
2011 Mains $000 |
2011 Supps $000 |
|---|---|---|---|---|
| 87,041 | Schedule of Revenue - Crown Deposit Guarantee Scheme (Fees) (page 100) | 38,075 | 32,064 | 35,498 |
| 13,740 | Schedule of Revenue - Other Current Revenue (Recoveries) (page 100) | 141,238 | 110,000 | 95,507 |
| 13,258 | Schedule of Assets - Accounts Receivable (Expected Recoveries) (page 101) | 739,394 | 320,000 | 723,102 |
| - | Schedule of Assets - Accounts Receivable (DGS Fees) (page 101) | 827 | - | 43 |
| 24,529 | Schedule of Liabilities - Deferred Revenue (Crow Deposit Guarantee Fees) (page 102) | - | - | - |
| 43,062 | Schedule of Liabilities - Guarantee Scheme Payables (Gross) - Defaulted Entities (page 102) | 37,314 | - | 36,320 |
| 748,000 | Schedule of Liabilities - Guarantee Scheme Provision (Net) - Undefaulted Entities (page 102) | - | - | - |
As a consequence of payments made to depositors of failed finance companies under DGS, the Crown has inherited the beneficial interest in the proceeds that can be recovered from the sale of the secured assets of the receiverships. The reported receivables represent the receivers' best prudent estimates of likely recoveries from the receiverships. However, the eventual return to the Crown is dependent upon the value that can be realised from these entities' assets and the timing of receipts. A range of outcomes for eventual recoveries is possible. The Crown monitors the receiverships to obtain assurance that optimal proceeds are realised as soon as possible.
Analysis of recoveries from receiverships
| 30 June 2011 $m |
30 June 2010 $m |
30 June 2009 $m |
|
|---|---|---|---|
| Opening balance of recoveries expected from receiverships | 13 | 34 | - |
|
1,104 | 8 | 34 |
|
(236) | 7 | - |
|
(142) | (35) | - |
| Closing balance of recoveries expected from receiverships | 739 | 13 | 34 |
| Total Payments to Depositors under the Guarantee Scheme | 1,897 | 43 | 70 |
| Less change in opening and closing payables | 5 | (28) | (14) |
| Cash payments made | 1,902 | 15 | 56 |
Crown Wholesale Guarantee Facility
In addition to DGS, the Government operated an opt-in WFGF from November 2008 to April 2010. As at 30 June 2011, 24 guarantee certificates remain in place, and the value of wholesale securities guaranteed was $9 billion. No provision is made for losses under this scheme as the probability of loss is considered remote.
| 2010 Actual $000 |
Summary of Crown Wholesale Guarantee Facility Disclosures in the Supplementary Schedules - Non-departmental | 2011 Actual $000 |
2011 Main Estimates $000 |
2011 Supp. Estimates $000 |
|---|---|---|---|---|
| 76,455 | Schedule of Revenue - Crown Wholesale Guarantee Facility (Fees) (page 100) | 80,356 | 79,851 | 80,356 |
| 206,298 | Schedule of Liabilities - Deferred Revenue - Crown Wholesale Guarantee Facility (Fees) (page 102) | 125,941 | 128,047 | 125,905 |
Dividends
Total SOE dividends received this year have increased by $82 million from 2009/10 (page 100). Particular items to note are that Meridian paid a large special dividend as a result of the sale of Tekapo A and B to Genesis as required by the Electricity Industry Act 2010 reforms, and that Mighty River Power's dividend declined compared to the large special dividend it paid in the previous year.
Dividends from Crown entities (TVNZ) increased by $3 million (page 100) in 2010/11, owing to increased profits for the 2009/10 financial year.
Other dividends received from the Crown's share in Airports is $300,000 (page 100) less than those received in 2010/11 primarily owing to the change in the economic climate.
Notes
- [7]The provision for payment of Deposit Guarantee Scheme guarantees was initially reported, prior to default of an entity, as a 'net' amount (payables less expected recoveries). On default of an entity, the provision is 'grossed up' into the payable and the receivable outstanding.
