Wellington, Feb 25 NZPA - Questions are being asked about why FAI Finance is getting a government guarantee for retail deposits.

FAI Finance is owned by the troubled Hanover Group.

Hanover Finance investors last year agreed to a recovery plan rather than let the company go into receivership.

Brian Gaynor of Milford Asset Management yesterday told TV One that based on the record of shareholders Mark Hotchin and Eric Watson, the Government's guarantee of FAI Finance was "appalling".

There are quality criteria about what companies would get the support.

"My complaint about that is we set the bar so low in this country... given what has happened to a lot of individuals who invested in companies associated with the Hanover Group," he said.

Progressive MP Jim Anderton today also questioned why the company was eligible.

"The point of the guarantee is to prevent the entire deposit base of New Zealand fleeing. But there is still room for non-guaranteed businesses that should be able to charge an interest rate reflecting their risk. Hanover is the sort of company that the market make its own decisions about."

A spokesman for Finance Minister Bill English said the minister was unable to comment on the guarantee late on Wednesday evening.