5 Nov 2012

Debentures industry under review

6:59 am on 5 November 2012

Australia is reviewing the debentures industry.

Unlisted debentures are popular with retirees, whose investment options are dwindling as bank term deposit rates fall.

Debentures are fixed interest securities that promise better returns than banks, but which carry higher risk.

Banksia Securities in Victoria went into receivership on 25 October, owing investors in 15,000 accounts more than $A650 million.

Banksia operated by selling debentures and unsecured bonds and lending the money to small business. Unlike bank deposits, these securities were not covered by a government guarantee.

Radio New Zealand's Sydney correspondent says a government agency has now pledged a review of Banksia and will determine whether laws around non-listed debentures are adequate.