The Press. SATURDAY, MAY 13, 1893. THE BANK SUSPENSIONS IN AUSTRALIA.

Press, Volume L, Issue 8482, 13 May 1893, Page 6

The Press. SATURDAY, MAY 13, 1893. THE BANK SUSPENSIONS IN AUSTRALIA.

A correspondent signing himself "Trader," whose letter appeared in yesterday's issue, assumes that in our article of Thursday on banking we overlooked one of the necessary conclusions of our argument. It was not our purpose to draw any special inference from the facts as stated, but to present to oar readers certain figures which were, we thought, of some interest at the present juncture of affairs in Australia. While agreeing with much that our correspondent baa to say in his communication, we are not ia entire accord with him

when he implies that Australia bas been using too much borrowed capital in its banking operations. Seeing that, according to the returns published up to December 3lst last, the bulk of the deposits used by the Banks for banking purposes was colonially owned capital, it follows that by far the largest portion of the banking power of the institutions doing business in Australia is provided by colonists themselves, instead of being, as is generally supposed, borrowed from England. Perhaps our correspondent is not aware that in December last the total depositheld by the Banks in Australia were £145,000,000, out of which colonists provided £113,000,000. This large sum, owned and deposited by her people, at least shows that Australia has the most of the capital necessary to carry on the Bauking operations required by colonists. The real cause of the present trouble is not the amount of deposits employed by the Banks as compared with their capital and their coin and bullion reserves. It ia to be found in the nature of the advances made. Had the Banks, which havo suspended, confined their operations to short-dated advances, the same as is the practice in Europe, their position, with the large coin reserves they hold, would have been impregnable, no matter how severe the panic had been. But, unfortunately, in their desire to employ profitably the deposits thrust upon them they have made long-dated advances upon lands, stations, and other securities which are not immediately realisable. Herein lies the whole of the mischief. Had the Australian Banks which have suspended held short-dated negotiable securities to represent their advances, the recent troubles would never have happened ; for had they been suddenly called upon to provide specie for the whole of their credit) current accounts, their notes, and their short-dated deposits, they could have gob advances from kindred institutions upon the securities they held, and so nipped the trouble in the bud. But the longdated securities held by them, although doubtless sound enough in the ordinary course of events, are not of a nature' which other Bauks would advance gold against in a time of panic. It is because the English Banks confine themselves to short dated advances that they are enabled to carry on their gigantic operations with such small ooin resources.

It is, we repeat, the class of banking operations which have been carried on in Australia which have brought about; the present trouble, and not the extent of the operations of the banks in proportion to their capital. An examination of the world's banking returns shows that the transactions of the Australian Banks in proportion to their capital are not so great as those of the English Banks in proportion to theirs. As we have indicated in another article the bullion iv the world is valued at £1,131,000,000, out of a total asset of £60,760,000,000, or say one sovereign for each £53. From this fact it will be gathered that the coiu necessary to carry on the world's commercial operations is comparatively trifling. Panics are the outcome of the want of confidence, rather than the want of gold.