New Zealand and Colonial.

Auckland Star, Volume XXV, Issue 237, 4 October 1894, Page 7

New Zealand and Colonial.

Terms of the Agreement Between the Banks.

Statement by the Colonial

Treasurer.

Mr Ward, in laying the proposal for amalgamation of the Bank of Ne^v Zealand and the Colonial Bank upon the table of the House on September 14th stated that, lest a wrong impression should be formed by the publication of an incorrect statement of the facts, the Govern menb had decided to at once place the information before tho House and the country. The matter was; he said, under the consideration of the Government, and no decision would, ba arrived at with reference to it for some days. Tho proposal reads as follows: —

1. Negotiations have taken place for the amalgamation of the Bank of Now Zealand and the Colonial Bank of New Zealand, and conditions have been provisionally defined. These ate embodied in tho accompanying memorandum, and are" now respectfully submitted for'the sanction of the Government, as a necessary • preliminary to thtfir being laid before the shareholders of the respective banks for their confirmation. 2. Ib is confidently claimed that this arrahgemetib, if carried into effect, will greatly contribute to the soundness and stability of banking in the colony, and by reason of the materially increased net profits which will accrue to the Bank of New Zealand from the accesoion of the Colonial Bank's business, it would strengthen the security of the State in respect of its guarantee for the Bank of New Zealand.^ (3) The presence in the Bank of New Zealand's balance-sheet of a large item representing shares in the Bank of New Zealand Estates Company is a source of weakness to the Brink, and the Colonial Bank reasonably makes ib a condition of amalgamation "either that ib be 'entirely" removed, or that tho Government undertake to make good the ultimate deficiency, if any, which might remain after liquidation of the assets, and of the collateral cover hold by the Government :-(l) The paid up capital of the Bank, which, under the proposed agreement, is to be written down to £600,000. (2) Reserve liability of shareholders, £1,500.000. (3) The interest of the Bank ol New Zealand shareholders in the future profits of the batik, which, if the amalgamation be carried out, can hardly fail in ten years to accumulate to £500,000 —say £2,600,000. (4) This undertaking, in poinb of fact, already exists, because of the two millions ofcapitai guaranteed by the State to creditors bo maka good this item, with the others in the balance-sheet. The complete separation of the Estates Company from the Bank and the assumption by the Government of a share in its management and liquidation would be a moasure wise in itself and which the country desirea to see carried out, (5). It is respectfully suggested that a small board or confmission be seb up, half to be nominated by the Governmenb and half by the Bank, With an administrative head to be jointly appointed. (6). And ib is submitted that in order to economy and thereby the better security of the State, arrangements bo made for the rode.mption of the ( £1,500,000 5J per cent debentures which are now a first charge on the assets,, which iraposo a heavy and quite unnecessary burden of interest, and so leaaeri the resources to which the colony has to look for the protection of its guarantee, arid will stand in the way of a satisfactory re-arrangement of the administration. Ib is believed that this can be effected without raising any more money by loan. If part of the money already raised be used for extinguishing so much of these debentures there will, on the : contrary, be an actual reduction in the amount owing, by this means. By the resumption of some of the estates under the Land for Settlements Act, and by assistance from the bank itself* tho incubua referred to can be got rid of. John Murray. Wellington, September 11th, 1594,