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Coming out of the Government Guarantee scheme

At the height of the credit crunch in 2008, the government introduced a guarantee scheme for savings account holders in New Zealand. This meant that if you had savings in a bank or finance company which had signed up to the guarantee scheme but then got into financial trouble, the government would pay you back and you wouldn’t lose out.

Governments in most European countries and in the US have offered similar guarantees for many years as standard practice, but New Zealand and Australia were different and didn’t do this. With the credit crunch, the Australian government was worried that Australians would take their money out of their banks and put it overseas and so set up a scheme. New Zealand then was worried that kiwis would move their savings to Australia and so a deposit guarantee scheme was set up here.

Prometheus joined the guarantee scheme in October 2008. It has a cost and quite a steep one: we have to pay 3% on the total amount of money deposited with us, above the level we were holding when we joined the scheme. That’s on top of the interest we pay you as a saver.

You, our savers, have given us a vote of confidence and been very loyal to what we are doing. We’ve been very grateful for that. It seems you think social banking works, which it does and has done for 30 or so years worldwide. So we haven’t seen any change in savings being withdrawn other than the ebb and flow we normally expect. But we decided to hold back on trying to raise new deposits: they would be very expensive with the extra 3% we would have to pay the government, and that 3% is really paying for the risky practices of some reckless lenders. We didn’t feel it would be justified and we were holding enough money to invest in the projects coming to us.

This will all change on 13 October this year. The government is scaling back the scheme considerably and we, along with many others including most of the big banks, will step out of it. From that date, your savings won’t be guaranteed by the government and we’ll go back to the arrangements we’ve had from the beginning at Prometheus: backed by the strength of the social projects we invest in and by us avoiding the risky practices others have indulged in chasing after the illusory profits of the boom years.

We are in a strong position. Our support for borrowers, their focus on sensible social and environmental activities, our prudent approach to lending, how we manage ourselves and our focus on not pursuing profit for its own sake, all contribute to our strength. We don’t intend to change any of this or our values, and believe that you will want us to continue to invest your funds in the social and environmental projects we have financed for almost thirty years.

Our most recent prospectus and our latest audited accounts can be found here.

If you have any questions about this, call us toll free on 0800 776 648 or email us at info@prometheus.co.nz.