RUN ON BANK.

Auckland Star, Volume LXII, Issue 94, 22 April 1931, Page 7

RUN ON BANK.

CRISIS IN AUSTRALIA. Heavy Withdrawals of Savings in New South Wales. MERGER PROPOSAL. (United P.A.-Electric Telegraph-Copyright) (Received 11 a.m.) SYDNEY, this day. The position of the Government Savings Bank of JSTew South Wales, the withdrawals from which have been tremendously heavy in recent months, was considered at a special meeting of the State Cabinet when the Premier, Mr. J. T. Lang, informed his colleagues that the 'bank commissioners contemplated amalgamation with the Commonwealth Bank, the terms of which were how under consideration. The Cabinet decided to approve of the amalgamation. On behalf of the Commonwealth Bank Board, the chairman, Sir Robert Gibson, stated that the board had received a communication from Mr. J. T. Lang requesting the board to consider the proposition to absorb the Government Savings Bank of New South Wales in the Commonwealth Savings. Bank of Australia. The board advised the Premier that it was quite prepared to investigate such a proposal, and if a satisfactory basis can be arrived at on which a transfer can be effected the board will submit its views to the Federal Treasurer, whose approval will be required. It will be recalled that Mr. J. E. Teuton, speaking at Ballarat recently, sounded a, warning with regard to the stability of certain banks in New South Wales, the result of which was that the "Labour Daily" severely attacked him, and declared that the Government Savings Bank was never stronger in its history. The "Labour Daily" now publishes a , speech by Mr. W. T. Ely, one of Mr. Lang's Ministers, who said Mr. Fenton had committed an unpardonable crime on the workers' bank, which held more than £75,000,000 of the toilers' money, , and if there were a financial crash to- , morrow the one bank that would come out unscathed would be the State Savings . Bank. Amalgamation Plan. ■ It is regarded as certain that the publication of the Savings Bank's difficulties will cause a sensation throughout Australia. Mr. H. D. Hall, president of the Government Savings Bank, stated that the Premier had placed the proposal for amalgamation before the Commonwealth Bank at the request of the commis6ioners. ' The factors responsible were the adverse economic conditions, damag- * ing statements made at the last State * elections, which had caused a run on the s bank's funds, and the subsequent state- » ment in the evening Press relating to * the delay in the payment of interest on * the bank's holding of State Government c securities. N It is also nointed out that recent ..

lb IS aiSO pOIIUCU UUO IUOI ICI.UIU legislation by the State Government, aiming at a reduction of interest, produced, a very unfavourable effect, and that further heavy withdrawals continued for many weeks. Nevertheless the commissioners declare that the bank is quite solvent, and that the proposal for amalgamation at this stage is the only prudent course to adopt in all the circumstances. The last balance-sheet of the Government Savings Bank to June 30. 1930, showed depositors' balances at £70,033,343, cash reserves at over £16,000,000 and investments at £54,000,000, of which £29,000,000 were in New South Wales Government stocks. The Commonwealth Bank Act was assented to on August 20, 1924. and was brought into operation on October 10. This Act was passed to broaden the scope of the Commonwealth Bank, and to enable it' to perform the functions for which it had been established. A board of directors controls not only the general business, but also that of the note issue. This board consists of the Governor of .the Bank, the Secretary to the Treasury,. and six others 'ivho are or have been actively engaged in agriculture, commerce, finance or industry. A further amending Act—the Commonwealth Bank Act, 1927—provided for the separation of the Savings Bank Department from the general bank, its establishment as a separate institution, and the transfer to the "Commonwealth Savings Bank of Australia" of all assets and liabilities of the Savings Bank Department. FEWER DEPOSITS. HEAVY WITHDRAWALS. (Received 11.30 a.m.} SYDNEY, this day. The "Sydney Morning Herald" says the suggestion for the absorption of the New South Wales Government Savings Bank by the Commonwealth Savings Bank has arisen because of substantial withdrawals from the State Bank, extending over the period from October last, and as new deposits do not come in as freely as heretofore there has been a drain on the cash resources of the bank. . It has been recognised that the economic conditions prevailing have affected all the savings banks in Australia for the past year or so, causing abnormal withdrawals of deposits. In the other States, however, the difficulty was recently overcome by a lessening in the rate of withdrawals and an increase in deposits, but the unfavour- • able experience of the Savings Bank in New South Wales has been intensified during the past few months. The net result has been a weakening of the bank's reserves, even though the bank remains in a solvent condition. The "Daily Telegraph" states that for ] months there has been a steady flow of funds from this State to other States. ' Political developments here have caused ' consternation among investors, whose main concern is always security for their ; capital. Bankers have admitted that capital is still leaving New South Wales, though • they are not in a position to state what ( amount would be represented by trans- , fers during the last few months. , Mr. Lang's proposed reduction in the 11 interest rates has led to a flight of i ] capital and his subsequent repudiation' < of interest payments in London has i intensified the flow of money from Syd- < ney to Queensland and Victoria. ]