STATE AND BANKS.

Sun (Christchurch), Volume I, Issue 154, 5 August 1914, Page 8

STATE AND BANKS.

A PRECAUTIONARY BILL. ] i GUAEANTEEING THE NOTE ISSUE, i Yesterday the House of Eepresenta,- i tives passed the Banking Amendment Bill through all it 3 stages. The mea- } „ sure gives power to the Governor, in < such crises as the present one, to make any "bank's notes legal tender —in other t • words, the State the issue ', of paper money when gold is short. The following clauses of the Bill are ' the most essential, and explain them- i selves: — ] * '"The Governor-in-Council may from -, time to time„ as he thinks fit, by £ Proclamation declare that the notes 3 payable on demand by any bank ' therein named, and then issued or thereafter to be issued, or reissued within New Zealand under any law- ] ful authority in that behalf, shall ( during the period limited by the Prodamation, be everywhere within New , Zealand a-good and legal tender of money to the amount therein- ex- i pressed to be payable. , "No such Proclamation shall be ] made unless the Governor-in-Council , is satisfied,—' -. • (a) In the case of a bank having , its head office situated in New < Zealand, that, as between the - • i bank and its creditors, the assets of the bank exceed its liabili- , ties by at least the amount of : its paid-up capital; and (b) In the case of a bank having ; its head office situated outside . New Zealand, that, as between 1 - the bank -and its creditors, the assets of the bank within New Zealand exceed its liabilities stherein. ',-'•■. ~. ■" Before maMng any such Proclamation the Governor4n-Council may require that adequate security be given by the bank for the. ;perf ormanee of the condition that the bank shall pay all such notes of its own issue in gold on presentation at the " oflice of the bank at the place of issue of the said notes respectively after T;he expiration -of the period : limited by any original Proclamation : under this section, or by successive Proclamations thereunder if more than one. "At any time within six months ; after the expiration of the period limited by an original Proclamation under section two hereof or by successive Proclamations thereunder, if there have been more than one, the Minister of Finance, on being satisfied that a bank note covered by any _l~ such Proclamation has been duly presented for payment at the bank issu-,. \ ing the same and has not been paid, shall, without further appropriation than this Act, pay the same in gold to any bona fide holder, not being a bank, who may present the same for payment at Treasury. , "¥pon the request of the Minister of Finance the managing director, manager,. or accountant of any bank shall make full and true answers to such written enquiries concerning the business, and the assets and liabilities, of the bank as the said Minister thinks fit to make for the purpose of the exercise of the power conferred On the Governor-in-Council by section two of this Act, and shall verify the same by his statutory declars atf on *' Mi-"f. M. Wilford (Hutt), raised the question of the position of investment societies which took money at call and loaned it on mortgage. There might be an unreasonable and these institutions, though perfectly solvent, could, not meet the claims for cash. He - ■ suggested that they be afforded some form of Government guarantee in the same way as the State, subject, of course, to a Government valuation and audit. The Minister of Finance replied , that he did not think it necessary to ~, adopt the suggestion. The provisions "/ of the Bill would be ample to meet all purposes because the creation of bank uotes as legal tender would supply the N banks with sufficient means to provide for overdrafts. If any further step was required have serious consider- *""' aticn. NO NEED FOE ALAEM. On the motion for the third reading, Sir Joseph Ward said that he agreed with the Prime Minister that there was no occasion for the people of the Dominion to feel unduly alarmed. The measure which was now being passed was one which would be a good thing for -the Dominion at all times, and not only on occasions such as the present. All the' banks carrying on business in the Dominion were financially sound. The action which the Government and the country was taking at the present time should be endorsed by everyone. The measure contained no measure of risk, but made for the stability of all financial institutions. There were other matters connected with the finances of the country which might be discussed, but this was not the time to bring them up, Mr H. G. Ell (Christchureh South) also emphasised the opinion that there was no need for apprehension in the Dominion. He thought that the Minister of Finance should have the power to expand the note issue of the banks ''■ within reasonable limits, on certain oc- - • casions, as was done in some older countries. At present the banks, had to , hold a reserve amounting to a third of their note issue. Should the occasion f 'Wriv-e the Minister should have the * - power to expand the note issue. Should I

he bring down any further measure, he (Mr Eell) hoped that the Minister would take this power to

MUSTN'T LOSE OUE HEADS.

The Minister, in reply, said that when the Bill was brought in, everything was peaceable, and there did not seem to be any matter of urgency. Neither was such urgency necessary that day, but he thought it advisable to get the J measure on the Statute Book. He hoped that no Minister, member, bank manager, or the people themselves, would lose their heads over any crises that might arise. The banks in the Dominion were sound institutions, and every confidence could be placed in them. If the Empire were plunged into war, the people would be asked perhaps to make some sacrifices, but they would be sacrifices which a young country such as this must expect to make. But there was no need for panic, and he hoped that if nobody lost his head, there would be no serious financial difficulties Ahead. The Bill was read a third time and passed.