THE BANK of NEW ZEALAND

Auckland Star, Volume XXV, Issue 165, 12 July 1894, Page 5

THE BANK of NEW ZEALAND

A STATE GUARANTEE.

Wellington, Juno 29. When the House resumed ab half-past seven to-night, an adjournment was taken for an hour, to await a message from the GoverDor in regard to three Bank Bills of great importance, which the Colonial Treasure* had announced earlier in the day he intended to introduce and pass through all their stages in oue sitting. Meantime, the Bills were circulated. They are as follow :— BANK NOTE ISSUE ACT ABIENDMENT BILL. This provides that the provision of Parb 11. of the Bank Note Issue Act of last year shall remain in force until the 2nd September, 1895, and repeals the words, ♦* and the reserved profits," at the end of the first proviso of section 5 of the Act. ' SHAREHOLDEBS BILL. This is a measure to control the transfer of Bank shares. It consists of two clauses, the second of which provides that, notwithstanding anything contained in any Act dealiug with any Bank, or in any deed of settlement of any Bank, the directors of any Bank may decline to register any transfer of shares upon which there is any liability made by a shareholder to any person of whose responsibility they may not feel satisfied. BANK OF NEW ZEALAND SHARE GUARANTEE BILL. This Bill is to guarantee out of the consolidated fund a, special ißsue of shares by the Bank of New Zealand to the amount of two million pounds sterling. Clause 3 permits the directors of the Bank to increase the capital of the Bank by che issue of shares to any amount not exceeding two million pounds, in shares of £10 each, upon which there shall not be further-liability. Clause 4 reads :—" Such guaranteed shures shall be called A shares, and shall have preference over all ordinary chares in respect both of capital and dividend, and liability of holders of ordinary shares under section 21 of the New Zealand Bank Act, 1861, shall bo available to secure calling in, paymonts and cancellation as hereinafter provided of such guaranteed shares and dividends thereon, and the directors of the Bank may decline to register any transfer of chares upon which there is any liability made by a shareholder to any person of whose responsibility they may not bo satisfied, and any transfer of shares after being approved by the directors shall not be valid until authorised in writing by tho President." Clause 5 empowers the directors to call up one-third of £10 per share, for which shareholders aro liable undor section 21 of the Act of 1861, and to collect the 6ame within 12 months from the date at which tho guarantee cornea into effect, interest on calls not to exceed 5 per cent. Clause 6 says that the Bank shall,* at the expiration of 10 years from the date of issue of A shares, call in and cancel the same, on payment of the nominal value of the same, with accrued dividends. Clause 7 : Under thi3 clause, the dividend on L shares is not to exceed 4 per cent. Clause 8 reads: "Every sum of money for which A shares shall be issued under the authority of this Act, and dividends thereon, shall be a charge upon, and in tho event of default in respecb thereof by the Bank shall bo payable out of the consolidated fund of New Zealand without further appropriation than the authority of this [ Act." Clause 9 provides that in the event of I default the Colonial Treasurer may appoint a receiver. Claase 10 says that of the tvfa millions so raised ono million pounds shall be at the disposal ot tho Bank for use in its ordinary basines?, and the remaining one million pounds shall be invested in such manner as the Colonial Treasurer may approve. Clause 11 provides that during the currency of tho 'shares no dividend is to be paid without the consent of the Treasurer. Clause 12 provides that within three months of the issue of guaranteed shares (1) the head office of the Bank shall bo removed to Wellington ; (2) a general meeting of shareholders shall be called to meet in Wellington to elect a new Board of Directors, of whom the Preßidenb shall be appointed by the Governor in Council. Such President nGod nob be a shareholder in the Bank, bub shall have and shall exorcise all the duties, powers, and responsibilities of a director. The qualification of directors shall be the holding of one hundred either of A shares or of other shares of the Batik, or partly of one class and partly of the other class. Clause 13 : Under this clause a special officer shall be appointed as auditor in tho Australian colonies, and the Agont-General of Now Zealand in London shall appoint an officer in respecb of the business of the Bank in the United Kingdom. Clause 14 contains regulations aa to audit.

Clause 15 says that if upon the report of the auditors, confirmed by the President/, ib appears to the Coloniai Treasurer that the affairs of the Bank are in any respecl improperly or unsafely conducted ho shall call the attention of the directors thereto, and i!; shall bo imperative upon the directors to amend the managemenb and conduct of the business in such manner as the Colonial Treasurer may by any writing require. Clause 16 says in valuing shares held by the Bank in the Bank of New Zealand Estates Company, Limited, or any items which shall take the place of such shares, or any of them, the directors and auditors shall treat the same aB account in liquidation, and, pending completion of such liquidation, auch shares or item shall be taken at par or book value thereof. Clause 17 amends the deed of sottlemenb of the Bank, b6 as to make it conform to the provisions of tho Act. The Houee resumed at 8.30 p.m. The Bank of New Zealand Share Guarantee Bill was received by message from the Governor, and read a first time. Mr Ward moved that the standing orders be suspended in order to enable the Bill to pass through, all its stages. In moving second reading of the Bill Mr Ward said, in rieing to move the second reading of this Bill, he need hardly Kay that ifc was a matter of great urgency. Honourable members on both sides of the Hou3e would realise that a great responsibility had been placed upon the Government in this matter, a responsibility which he himself felt keenly. It was a responsibility, be would inform the House, that could not be taken were it not) that the necessities of the preaent financial situation demanded it. Tho proposals now before the House were of tho most important character, because they dealt with the concerns of one of the foremost financial institutions in this colony. It could not bo questioned, when honourable members^ were made fully aware of the exact position of affairs that tho step the Governmenb were now taking had been rendered necessary in tha general interaats of tho country, because it was necessary that in New Zealand at present we should have firm and unmistakeabiy sound financial stability, and this appiied more particularly to the Bank which now and for so many years ha« conducted the financial bueiness of the colony. He reminded the honourable members that only a ehort time had elapsed since the deplorable exhibitions of financial disaster which swept over the adjacent colonies. Ib was the desire of the Government to prevent anch a financial disaster overtaking this colony, and this being bo, honourable members

would sympathise with the Governmenb in theresponaible position they were thab night placed in. Last year untoward influences of an uuprecodented character had been ab work in this colony, which had created a lower standard of value of our exports than hud ever before existed, and in addition to this there had been a bad season for colonial products, two unfortunate elements which had worked greatly against the prosperity of the country. These adverse circumstances which had told bo severely on the country had been directly reflected, he was Borry to say, on every importanb financial institution in this colony. It had, therefore, told severely upon the great financial institution with which the Governmenb account of the colony was kepb, and which as ib was well known had for many years done the largest banking business in the colony. With an earnest regard for the welfare of the country the Government had recently felt it incumbent upon them to place themselves in communication with the confidential representative of the Bank of New Zealand, a gentleman whose long experience, knowledge, and mature judgment warranted the Government in placing great weight upon his opinion, which, after mature consideration, had been conveyed by him to the Government. The Governmenb deliberated lone and earnestly upon his opinion and the whole matter generally, and ultimately decided that it was essential in the public interest thab effective action must be taken without delay. He said the " public interest " because the Governmenb recognised, as every honourable member must recognise, that do person or company in this colony, no matter how importanb the business they conducted, was entitled bo assistance ab the expense of the taxpayers, and he gave the assurance thab it was nob the intention of the Government, in introducing this Bill, to place the taxpayers of the colony in such a position. He asked honorable members to dismiss from their minds the past career, management, and connections of fche Bank of New Zealand, and to take in the full importance of the prosenb situation. In telling the House v thab the future of this institution was in their hands, he said thab the House had also in its hands to a very large extent the success or failure of some years to coma of the colony's industrial enterprises. The colony's ramifications and financial connections were inseparably bound up for good or evil with that institution. They musb noc forget that this Bank was a public institution, and therefore its position was afa all times a matter of public concern. The question was, should the Governmenb allow this unsatisfactory state of things to continue until ib became absolutely dangerous ? They had to go to the right or the left. The Government had decided to go to the right, and take the House into their confidence, and the House musb be now responsible for the issue. In order to show them the full gravity of the position be read a confidential letter from a gentleman who was the confiiental representative of the Bank here ab the present time, and who had been requested by the directors to stop in and assisb bhem, The letter sbated among other things thab by what was proposed the writer was absolutely convinced that the State would not loose one penny, and that by this measure the bank affairs of the colony would be placed on a greatly improved footing for the future. He added that if the Government finally determined bo go on with the measure ib should-; be put through that day. The Colonial Treasurer went on to say thab in view of this important communication the Governmenb had the responsibility thrown upon thorn of acting in the general interest of the colony, or remaining inert. The course proposed was a bold and effective one, and the only one which was open to the Government, unless they decided to remain inactive. Ho predicted that ib would be a thoroughly adequate course, which would prevent any recurrence of the present situation. The essence of sound finance was good credib, and what the Governmenb now proposed bo do would preserve this good credit, based as it was upon an efficienb resource of capital and prudont management. The Governmenb, after going into thematterthoroughlyand exhaustively, found that the Bank's capital required enlarging. The representative of the Bank had informed the Governmenb thab the directors themselves had contemplated an operation to have this effect, but owing to the reflex of the financial disaster which took place in the other colonies upon London and the foreign markets ib had nob been found practicable. The House would observe thab the colony was asked to guarantee preference capital to a total extent of two millions. This appeared a starblingly large sum, bub he would remind them thab they were dealing with the finances of an institution of greab magnitude, the assets of which amounted bo a sum of eleven millions. The Governmenb were at first disposed to reduce the amounb in the Bill to one million, bub the representative of the Bank was perfectly frank and open, and said thab this would be inadequate. His arguments were so conclusive thab the Government felt tbab no other course was open to them than to guarantee two million perference shares, one million to be at the Bank's disposal for the purpose of its ordinary business, the other million to bo held in reserve, invested in such manner as the Colonial Treasurer shall approve. The House had a right to know how the measure proposed to guard againsb recurrence of the present state of things in the future. The condition of the guarantee was that ib be released ab the end of ten years. The Governmenb would during that time have full supervision over the transactions of the Lank through the auditor who would be appointed, and would devote his whole time exclusively to the Bank, his salary being paid by the directors of the Bank. Tho Government, moreover, had power to refuse to sanction of an unsafe or objectionable character. Another importanb advantage would be the provision for having bhe head office of the Bank in Wellington. The honourable gentleman concluded by saying he felt sure this measure would receive the support of all sound banking men on both sides of the House, as being calculated to put the finance and industry of the country on a stable footing, and to promote bhab confidence which is bhe foundation of enterprise.

Captain Russell said this was an occasion on which it would be recognised there should bo no attempt to gain a party advantage, and that it waa necessary to approach the question with a grave sense of duty. There was one paragraph, however, in the Governor's speech which said the position ot New Zealand was eminently satisfactory, and he though*; it a pity that Ministers, knowing what they must have known only a week ago, should have put fiuch words into His Excellency's mouth. In expressing his views he waa nob expressing the views of any party in the House. Ho might possibly be giving expression to the views of those on his own aide of feha House when he contended that no member of the Roues, except those on tho Government benches, exactly utidorefood the nature of the Bill. They were asked to jrnaranteo two millions of money nader the Bill, bue ho should not withhold his consent from it, as a great responsibility was placed on one in ench a matter, and by refusing to a Bill of this kind one might be producing a groat disaster. He had carafully considered the matter, and be had come to the conclusion that even a guarantee by the colony ot two million of money was not such a great disaster as would be caused if thfc Bank of Now Zealand bad to close its doors to-morrow. He thoughd at the same time a heavy liability would fall on the taxpayers by the Bill. It seemed to him they were in great danger of establishing a State Bank by the Bill, and he waa distinctly hostile to a State Bank. Ifc would be better if they bad a little more time to consider the Bill, bnt the entire responsibility most rest with the Government), and be sincerely

hoped thab what they were now doing would prove beneficial to the colony. Mr George Hutchison said this was a loan Bill for two millions which was not; to be used by the colony bub by an institution for which £80,000 & year would have to ba paid in interest. The Government asked the House to pass this measure through all its stages that nighb, but ho suggested that) the Colonial Treasurer on the motion for the Bill going to Committee should refer the Bill to a Committee, and the Housa might adjourn for an hour or two. They would then be able to give more consideration to the Bill than they could possibly do ab such short notice. He hoped Mr Ward would agree to this course; if not, ha should feel compelled to propose such a course himself. If that were not agreed to, then a double responsibility would rest with the Government. Dr. Newman, Messrs T. Mackenzie, Buchanan, and Hogg, aIBO spoke on tha Bill. Sir R. Stout said he saw no reason whatever for sending the Bill to a Committee, aa proposed by Mr Hutchison. They had tha assurance of the Colonial Treasurer that the Bill was urgently required, and if the Bill had to pass there was no occasion to waste any unnecessary time over it. He had intended to speak ab length on the Bill, bub he recognised that the matter was one of great urgency, and if they called twenty Committees to consider id they could not geb any more information about the Bill than they had already got. Mr Se'ddon said the Government were asking Parliament to accept a grave responsibility by this Bill, that a crisiß had arisen which it was necessary should be met. He complimented the Opposition on the manner in which they had received the Bill, because they had nob information at) their command tl\ab the Government had. He could nob see what a Committee could do in the matter as proposed by Mr Hutchison. When the information came to the Government that if relief were to be given at all it must be given ab once, he thought there was no reason for the Bill being referred to a Select Committee. There was no Committee appointed lasb session bo deal with a Bill affecting banking interests which the Government) passed through the House. Referring to Captain Russell's remarks aboub the paragraph in the Governor's speech about the satisfactory condition of the colony, he eaid thab ab the time thab speech was written they had every reason to congratulate themselves on the prospects of the colony, but this present crisis had suddenly arisen, and it was for the House by passing the Bill to dispel this cloud. If they did so ifc was hie iirm opinion it would redound to their credib and be beneficial to the country. He assured the House that the Government had nob taken this responsibility without the most careful consideration, and be hoped the Bill would bo passed without referring ib to a Committee. Mr Duthie complained that the Housa was taken by surprise in this matter. The Government had no right to keep back any information ab their command respecting the present crisis, and that the information should bo at the disposal of the House. Mr Bell said the Government were responsible for the statement thab the affuira of the Bank were in the state thab they described. They wera also responsible for the statement that if the Bill did not pass great ruin would fall upon many people in fcho colony. They were, therefore, responsible for passing such a Bill as this, which he (Mr Bell) took no responsibility whatever for. He was prepared to vote for tha Bill, and it the circumstances of the Bank were such as the Treasurer had described, then the Government were deserving of credib rather than otherwise in bringing down the Bill. Mr Ward replied briefly. He said no good was to be gained by referring the Bill to any Commibbee. If the Bill were delayed till to-morrow morning, as suggested by some honourable members, then fcho House would hot be asked to goon with ib-ab all, and the responsibility must then restr with those who delayed the Bill. The motion for the second reading of the Eill was agreed to. On the motion for the committal of the Bill, Mr G. Hutchison moved, •* That the Bill be referred to a Select Committee, and thab the Committee should report on it that nighb." He contended that the House should have more information before passing this extraordinary Bill. The amendment was lost by 51 to 8, and the Bill was ordered to be committed. The Bank Shareholdere' Bill and Bank Note Issue Bill wore read a second bima without debate, and ordered to be committed. Clause 5 of the Bank of New Zealand Share Guarantee Bill was altered so as to make ib permissive on the directots to levy £500,000 of reserve capital, aud at the reauest of the Colonial Treasurer the three Bifls wore passed through Committee, read a third time and passed. The Bank of New Zealand Share Guarantee Bill reached the Legislative Council ab 12.40 a.m. The Colonial Secretary moved the second reading of the Bill. Dr. Pollen objected to the Government by a side wind guaranteeing the credib of the colony under conditions as proposed by this Bill. He thought it needed no prophet to predicb bhat the prospecb of the country ever getting the money the State was callod upon to guarantee was an exceedingly shady one, but whilst saying this he waa not averse to affording assistance to tho Bank of New Zealand. Mr Stevens objected to such hasty legislation, and did not like the Bill because tha colony would come lasb in the question of claimants against the, Bank. Mr Oliver said the Council could not reject the Bill, because tho result would ba disastrous. Dr. Grace and Mr Kerr also spoke. «.-:s Mr George McLean sympathised with, the Governmenb ab the presenb juncture. He did not like the Bill, but was nob prepared to oppose ib, as he believed the Government were sincere in their endeavour to avert a public catastrophe. He thought the shareholders bad reason to complain thab the Bank of Now Zealand bad nob been placed in liquidation. The preesnb crisis brought ib home to every colonist that ib was their duty to take a deeper interest in monetary institutions than they had hitherto. Mr Shrimaki and Mr Pharazyn also spoke. Mr Bowen objected to hurrying the Bill, and would rather see ib thrown out) altogether than nob discussed on its merits. The second reading was agreed to on the voices, and the Bill was referred to a Selecfi Committee, which is still (2.45 a.m.) Bitting. The Bank Note lesuo Bill and Bank Shareholders Bill were read a second tiino. The Select ComniiMee examined the Premier, the Colonial Treasurer, and Mr Murray, and reported in favour of the passing of the Bill, Wellington, Saturday, 4.15 a.m. All the Bank Bills p&psed their final stages in the Legislative Council at 4.10 o'clock this morning:, and received the Governor's assent immediately afterwards. The wreck of the Jessie Readman at the Chatham Islands was cold at auction at) Wellington for £10, to Captain Itomeril, of the r.s. Kahu, and Captain Cooper, commission atjenb. The vessel's sails realised nearly £50. Tho principal buyers were the captain of the French barque Federation and Mr Gannaway. The purchasers of the wreck have decided nob to make any effort to float the vessel. She will be dismantled, and all her gear and fittings brought to Wellington for sale. The new owners expect to make a very handsome profit oat of their purchase*