BANKS' HELP.

Auckland Star, Volume LXX, Issue 196, 21 August 1939, Page 9

BANKS' HELP.

NEW ZEALAND LOAN. FREE GUARANTEE. " NOT EVEN A COMMISSION." PROTEST TO MR. NORMAN. LONDON,-July 31. "There is everything to he sa id for t-ci-nvy at the proper times, but it must -urely be to the good that the inner JiKt"iy ot tin- New Zealand loan nogoii.il ions should be appreciated by the ncple of New Zealand," writes L. D. Williams, city editor in "The Daily Mail." Mr. Walter Nash, who is now in Paris <li>eu.-,.-iiig trade matters with the Eiench Government, has, I have no doubt, fully conveyed to his Government the very great difficulties which stood in tho way of converting the £17.000,000 conversion loan maturing on January 1, 1 0K)—<1 ifli. iilties which were not of the City's making. "Mr. Savage's Minister of Finance has himself acknowledged the entire syinpntlly and loyal regard for his important, quarter of the Empire which he found during his stay here. At the same time our fellow Britons in New Zealand will hardly be content to permit their loan conversions to bo subsidised by British banks without insisting on the necessary financial changes to prevent such a thing happening again. "I think it questionable whether the banks ought to have been asked to guarantee the new £10,000,000 loan at all. "Certainly the bankers protested vehemently at the meeting with Mr. Norman. What they were asked to do, they said, was not banking business. "This loan was not underwritten in the ordinary way. There is not even a commission. Strong Protest. "Of the £16,000,000 conversion issue, the banks undertook to shoulder up to £6,000,000, any part of the loan that is not covered by conversion or cash applications, the remaining £10,000,000 being similarly guaranteed by the Bank of England. "there was, at one time, a proposal to bring in smaller institutions. "Tho banka apparently had no complaint about the absence of commission. This counts little if there is an appreciable discount in the price when dealings have started in the market. But in the event of a discount, the arrangement simply means that the banks will have to write off the loss out of their surplus and reserves, which in these days, as they pointed out, are not what they were. Mr. Norman, on the other hand, contended—and everyone give* him full credit for the undoubted correctness of his attitude—that the alternative was a default, which could not be contemplated. In the end the bankers agreed. Bank*' Helping Hand. "That the guarantors expect to take up a certain amount of stock goes without saying, otherwise there would have been a readiness of the market to underwrite in the normal way. "Possibly these fears will not prove as burdensome as at first appeared, especially since the good reception given by tho market to the conversion scheme. "But the main point is that the banks have done again what they have of tea done before—though without much recognition—namely, given 'something for nothing,' this time to help New Zealand out of a hole. "I think it right that everyone should know about this, and trust that a frank understanding of the facts will encourage Now Zealand in efforts to restore her credit to the particularly high level it has stood at in the past. Certainly if this is done the further heavy loan maturities in the next few years, will cease from worrying either the New Zealand authorities or the City."