BANKS AND PUBLIC.

Auckland Star, Volume LXIII, Issue 148, 24 June 1932, Page 2

BANKS AND PUBLIC.

LITTLE-KNOWN FACTS.

PROTECTION OF CUSTOMERS,

FAR-REACHING POWERS,

" It would be worth a good deal, from the point of view of public interest, if you make yourselves a body of men trained by practical experience as well as study to give a lead to public thought and discussion on matters that touch banking," said Mr. J. S. Barton, S.M., examiner for the University of New Zealand in the subjects of banking law and practice for the bankers' diploma, in addressing members of the New Zealand Bank Officers' Guild in Wellington.

"Never before in the history of this Dominion have the bunk and its functions come in for so much discussion and criticism," continued Mr. Barton, "and as the people generally are somewhat bewildered by the effect of present-day happenings and tendencies on their financial prospects, it is not surprising that there is a good deal of confused thinking and talking going on. Degree of Control. " For instance, the Press reports a speaker last week as having said that control of finance and currency must be taken out of the hands of the bankers and given to the people. I suggest, firstly, that you, with your knowledge of the degree of control that exists at present, should take the opportunity to inform the public on this point. You might indicate for a start that three important and far-reaching sections enacted in the Banking Act for the protection of the public begin with the words, ' Notwithstanding anything to the contrary in the charter of any bank incorporated in New Zealand.'

" These provisions are designed to protect persons dealing with the banks and accepting bank notes. They provide that the shareholder of a bank, unlike any other shareholder, cannot at his will r.-jil his shares, and rid himself of a liability for uncalled capital. The uncalled capital in the shares of a financial shareholder is looked upon as a fund for the protection of creditors and note-holders of the bank, and his right to transfer his shares is restricted by the requirement that he must obtain the written approval from the directors of the bank before he con rid himself of his liability. The directors can refuse, and need give no reason for their refusal, and the shareholder is without remedy. The value of this to the community at times of etress when shareholders might be considering a process known in all other companies as ' unloading ' should be obvious.

Shareholders' Responsibilities. " Tell the public that shareholders of banks are peculiar in this respect also, that if, for the further protection and assurance of the bank's resources, the directors should decide to call up furthi-r capital, they may do so, and give that new capital precedence over the existing capital, -without any reference whatever to the rights and wishes of the existing shareholders.

" Tell your public also," continued Mr. Barton, " that a condition in most, if not all, the charters under which th<- banks have obtained their incorporai'.on is that a shareholder docs not necessarily end his liability by paying up the. amount unpaid on his shares; but, if it should be necessary for the protection of the bank's creditors, he must pay up again at least as much as lie has already paid, so that if the holder of £5 shares has paid them up to £4. and the liquidation of the bank's resources should Lc necessary to protect its creditors, that shareholder must pay another £4. " Tell the public that a. banker is bound to publish weekly and quarterly statements and abstracts of his transactions and accounts, and, furthermore, that he alone of all business men in our community can be compelled to produce his books in litigation to which he is not a party. Make it clear also that the basis of his taxation is the total of his assets and liabilities."' What Further Control? After referring to other legal responsibilities of banks, Mr. Barton asked: What further control was suggested, and for what purpose? As far as he could make out the somewhat bewildered demands for more control in banking resolved themselves into either a demand for a fiduciary issue of notes, or to a demand that the lending of the people's money now entrusted to the banks should be at the discretion, not of trained men, such as bank managers and directors, but of other persons selected ill the present crisis on some principle or basis not yet disclosed. Mr. Barton went on to advise the bankers present of much further information they could probably give to the public which would lead to "clearer think, ing upon financial matters.