BNZ

"Collins recalls BIL’s treasurer being invited to speak to a group of the BNZ’s senior corporate bankers. He was asked to talk to them about how he had rung the bank at 9 a.m. and by 5 p.m. had in place a $500 million loan facility. ‘The point of the example,’ says Collins, ‘was to encourage all the corporate bankers to lend more and more money and this was an illustration of how to respond quickly to what clients wanted.’ In hindsight, the incident could just as easily have been used to illustrate the lack of caution in corporate borrowing and lending, and how inadequate bank oversight was at the time. There were many contributing factors and perhaps it should have been no surprise that, to taxpayers’ chagrin, just a couple of years later the Bank of New Zealand needed a bailout."

"Gibbs’ scheme was good enough for the Hong Kong Bank (now HSBC), but since it didn’t operate in New Zealand special arrangements were required. In the end, Gibbs arranged that the Hong Kong Bank send a letter of credit to BNZ for $115 million which then endorsed Gibbs Securities’ bills of exchange. The BNZ endorsement turned the bills into first-rate paper. Gibbs then used Jarden and Co. (New Zealand’s largest broking firm) to sell the paper in the money markets. In a roundabout way, then, Gibbs and Farmer were effectively funding it themselves, putting no money in, but having gained the confidence of Wardley, the Hong Kong Bank and BNZ. The whole process had been made much easier by the financial deregulation that the government had passed over the previous months; Gibbs had been amongst the first to take advantage of the new freedoms."