A CENTRAL BANK.

Auckland Star, Volume LXIII, Issue 224, 21 September 1932, Page 6

A CENTRAL BANK.

Bankers and statesmen have begun to realise more strongly since last year's financial crisis the advantages that may be obtained through central banks, and the Ottawa Conference has done much to help the movement. Mr. Coates, back from Ottawa, says the establishment of a system of central banks, with a "super" bank in London, for the better control of Empire . finance, is "highly probable," and the Prime Minister adds that the question as it affects New Zealand will be considered by Parliament in the coming session. Sir Otto Niemeyer, in his report eighteen months ago, recommended that legislation should be passed to establish a central reserve bank which should bo charged with responsibility for the stability of the Dominion's currency, and should control the note issue. This would involve transfer of the note-issuing powers now possessed by the six trading banks to the suggested central bank. Further, Sir Otto Niemeyer recommended that .the trading banks should be required to keep minimum reserves with the central bank. It would thus be a bank of issue and a bankers' bank, and among its duties would include the control of the exchanges. Advocates of central banking in New Zealand have been watching affairs in Australia with much interest, and their case has been strengthened by the remarkable recovery of the Commonwealth. Statesmen at Ottawa said definitely that co-operation was necessary not only Imperially, but internationally. While the Conference was sitting, a leading English banker advocated the creation of a super-central Empire bank Avith a credit of £200,000,000. This bank, he said, would be able to settle the balance of payments between Empire countries, and its credit balance could be used as a basis for local currencies as effectively as gold. If an Empire bank of this kind were created it would be carrying still further the central bank idea. It. would, in fact, be a central bankers' bank, and would resemble in many ways the Bank of International Settlements at Basle. Opinion is moving rapidly in financial matters, and with the worst phases of the depression apparently past, the countries of the Empire are freer to consider action. New Zealand's problems are small compared with those of most countries, but the volume of financial transactions, internal and external, and the development of the banking system, as Sir Otto Niemeyer stated, are sufficient to warrant' the establishment of a Central Bank.