Fonterra rules out bank status

Dairy giant Fonterra has ruled out adding a bank to its business operations as farmers' borrowing options are squeezed by the failure of dairying lender South Canterbury Finance.

Finance industry commentators suggested this week that Fonterra should get into the lending business.

Federated Farmers said the SCF receivership raised concerns about a continuing source of funds to pay for seasonal grazing.

Fonterra chief financial officer Jonathan Mason said that starting a finance division could risk the accusation that the dairy company was subsidising one group of shareholders at the expense of another.

Fonterra did not have the systems, processes or competence in place to evaluate credit risk.

Also, Fonterra has just undergone a year-long capital restructure process with its shareholders.

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