GOLD IN BANKS.

Auckland Star, Volume LXVI, Issue 243, 14 October 1933, Page 12

GOLD IN BANKS.

VALUATION QUESTION.

CLAIM TO "TRUE VALUE." STATEMENT BY MR. GROSE. (By Telegraph.—Tress Association.) WELLINGTON, Friday. The following statement lias been made by Mr. J. T. Grose, chairman o£ the Associated Banks, in connection with the Reserve Bank Bill: — When the Reserve Bank Bill was first mooted, the Prime Minister, the l\t. Hon. G. W. Forbes, agreed that the proposed bill should be discussed with the banks, who, though some of them were opposed to a central bank, had agreed to assist the Government in seeing that the bill was drafted on the best possible lines. As a result of this, small committees were appointed by the Government and the banks. They went through a preliminary bill in detail, and made recommendations to the Government. Though 011 one or two major points agreement could not be reached, a bill was drafted.

Following that, the heads of all the banks were invited to meet the Cabinet, and the whole matter was again discussed. A good deal of discussion took place in respect of the true value of the gold held by the banks. The gold is held largely against their note issues, but also substantially as a reserve in the ordinary course of their business, and quite apart from the requirements of their own note issues.

The banks held that the gold was their property and that the true value of it, of course, was theirs also. As is recognised at law, all gold and silver paid into a bank becomes the absolute property of the bank. Those who pay it in become depositors, and have a claim against the banks as their debtors. Conversely the deposit of gold or other currency by a customer might reduce his overdraft and no reduce a bank's claim as creditor against the customer as debtor. Clause in Original Bill. No satisfactory conclusion between the Government and the banks was then arrived at in respect of this matter. Many meetings between the heads or representatives of the banks and the Minister of Finance and others followed. In the end, though the banks did not in any way depart from their claim that the true value of gold held by them belonged to them, it was agreed that a clause should be put into the bill under which the contention of the banks was set out. It was also set out in the bill that, haviiif regard to all circumstances, it might" be contended that the reserve bank or the Government would be equitably entitled to a proportion of such value, and the clause provided that on realisation the value of any gold coin transferred to the reserve bank hy any bank "shall be credited to that bank or apportioned between that bank and the reserve bank, as may be agreed between the governor of tho reserve bank and the said bank." Failing that, the question was to be determined by others mutually agreed on by tho bank concerned and the Governor of the reserve bank, and fa.ilfntr that by a special tribunal comprising the Chief Justice of New Zealand and two other persons. This clause was arrived at as stated after very many consultations and discussions and incorporated in the bill. Tho bill was introduced into Parliament last session, but did not get beyond the first reading. Nature of Amended Bill. The banks now learn that there have been deliberations by members of the Coalition Government, and that an amended bill will be introduced shortly. It has been stated 011 behalf of tho Government that even if any possible changes should prove necessary and desirable in the "bill, it would remain substantially as first presented so far as the general principles concerned, and also that there were to be no major changes in tho method of working of tho reserve bank. _ This would seem to dispose of reports that circulated recently that it was intended to have a majority of Govern-ment-appointed directors, or even that the Government should provide the capital for the bank in lieu of subscription by private shareholders. As stated, the banks hold that then gold with its true value is their property. It is not generally known that a great deal of gold coin imported into New Zealand by the banks and held by them has nevere been in circulation, but has been retained in the banks' safes. It may also ho explained that a good deal of gold thus held lias been received in exchange for bullion purchased in New Zealand by the banks. There is another factor not generally known —that until recent \eais settlements of exchanges between Australia and New Zealand were frequently made in gold.