KEY POINTS:
A taskforce set up to bolster New Zealand's capital markets has brought forward plans to make recommendations to the Government by almost a year because of the global financial crisis.
Capital Market Development Taskforce chairman Rob Cameron told members of the fund management industry yesterday that it had
intended to report back in September next year.
But the global financial crisis had changed its perspective and made action more urgent.
"Our approach was to first get a solid understanding of the trends and in this area there has been a dramatic change over the last few months.
"Now we are in the middle of a global financial crisis which is going to have a profound effect on the structure of the financial systems.
"We need to understand that so that we can understand how New Zealand is positioned in the world."
Cameron said the taskforce was in the process of pulling together a set of measures to help the capital markets work again and would be approaching whoever made up the new Government with its suggestions.
Those recommendations would target what he termed as the "low hanging fruit".
"If we look to the capital markets at the moment the most important thing will be the de-leveraging process."
He said the recommendations could include the acceleration of rights issues.
"We have had a limit of 15 per cent of the market cap of a firm. But given that values are falling so quickly is that an appropriate level?"
It may also look at recommending ways to fast-track the ability of companies to access capital from their shareholders.
Cameron said the changes would not fix the problems but would provide the ability for the corporate market to respond quickly.
He warned there could be serious implications for New Zealand if the Government did the wrong thing in handling the economy. The experience of other countries had indicated the type of problems that could be created by poor handling of financial crises.
Cameron cited the example of Japan where poor government intervention led to a recession lasting 10 years. He also cited the US after the crash in 1929: "The US did not intervene in the Great Depression until 1932. The crash occurred in 1929. By then there had been a 30 per cent drop in growth and unemployment had risen to 25 per cent."
Cameron also called on those within the industry to come forward with suggestions.
"We are preparing a set of recommendations now. We are engaging actively with the industry, we have spoken with INFINZ [Institute of Financial Professionals], law firms, private capital players. We are encouraging people, whoever they know, to engage with us directly. We want to hear from you."
Cameron said the taskforce had already established focus groups. "We are looking to recruit organisations and people into the process. We are not going to go into a cave."
Cameron described the financial crisis as "tectonic" and said he believed there were very few people in New Zealand who understood what the world was heading into.
"It is extremely serious."
The taskforce was set up in July with the aim of seeing the Government and private sector work together to develop New Zealand's capital markets. Its members include NZX chief executive Mark Weldon and Fletcher Building chief Jonathan Ling as well as senior figures from the sharebroking, banking and fund management industries.
