This isnt the first time this sort of thing has happened, many wise old-heads in the industry have been aware of the potential hazard and have worked to protect their business from it.

The goods market will only be affected at the margins. I really cant imagine Bridgecorp and their ilk was funding an awful lot of productive activity in NZ.

Ultimately I don’t think this will be bad to bad for the credit markets (we are flushing out some of the crap, sadly a few good bits get taken out as well), but contagion to the goods and labour markets would be a concern.

Western Bay – Small, poorly run

National Finance- Small, poorly run

Bridgecorp – Medium sized, basket case

Nathans – Small, poorly run, confusing structure

Property Finance Group – needs capital.

Provincial – mostly well run, supported by owners with capital injections, repay most if not all it owes, went bust because of ill advised venture into South Auckland car yard finance.

The people with their money in decent finance companies would only have been hurt by one or two of these collapses. And I think that is the lesson that will be learned. The badly run finance companies will find it very difficult to raise money and they will collapse. And probably deservedly so.

Finance companies who have been tightening their lending criteria, that are backed up by their owners (ie, willing to inject capital), who have healthy balance sheets will survive.

This isnt a fatal problem for the finance company sector in NZ, it is only a fatal problem for poorly run companies sailing too close to the wind.