Guideline exemptions

Press, 12 May 1984, Page 24

Guideline exemptions

PA Wellington The Reserve Bank has explained how newly established finance companies will be affected by regulations introduced this week penalising lending growth in excess of the 1-per-cent-per-month lending guideline. The bank said newly formed finance companies, and those in the process of being formed, would be given a limited exemption under the regulations. The exemption would be linked to paid-up ordinary capital and would allow new companies to lend up to twice

their ordinary paid capital by December 31, without being considered as breaching the 1 per cent guideline. The standard 30 per cent investment requirement would continue to apply. The bank said the level of the exemption would enable new finance companies to function, but would compel them to share the growth constraints applying to existing companies, whose level of outstanding lending was typically eight to 10 times paid ordinary capital. However, a new company

might take two years or more to reach that ratio, and the proposed two to one maximum ratio took into account theDecember 31, 1984, expiry date of the new regulations. Applications for exemption under this provision would be scrutinised carefully. The exemption would not be given to new subsidiaries and associates of existing finance companies. Those new companies who wished to seek exemption under this provision should make written application to the Reserve Bank in Wellington, the statement said.