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Seventh New Zealand finance company collapses

Another New Zealand finance company collapsed on Thursday - the third in 10 days - prompting calls for the government to step in and regulate the sector in which thousands of small investors have their savings.

Directors of Five Star Consumer Finance Ltd, of Auckland, called in receivers, citing “serious concerns as to the state of the debenture market and the ability of Five Star to attract new funds and retain existing investments.” It was not immediately known how much Five Star owed or how many investors had put money into it. The company was ranked at number 41 in terms of assets in a recent survey of finance companies by the New Zealand Herald.

Greg Muir, chairman of Hanover Finance, one of the biggest companies, said Wednesday that recent failures had slowed down the flow of new money going into finance companies, resulting in a sharp decrease in crucial business investment as lenders sought to maintain liquidity. He called on the government to introduce quickly a regime under which companies could voluntarily comply with proposed new regulations controlling the sector that are currently not scheduled to take full effect until 2010. The measures include mandatory credit ratings from a reputable international agency and minimum capital ratios. (