THE BANKING ENQUIRY.

Press, Volume LIII, Issue 9520, 12 September 1896, Page 10

THE BANKING ENQUIRY.

(press association tklcgram.) WELLINGTON, September 11. The House Banking Committee resumed its investigations at 11 a.m. The examination of Mr T. G. Macarthy by Mr Montgomery was continued. He produced a statement showing that there were only two Colonial Bank accounts in Central o"tngo, of the value 01 £76 8s 7d, which had not been taken over by the B.'.nk of New Zealand. Of those taken over seven had been subsequently closed by the Bank «£ New Zealand. Tiie value of these seven accounts was £14,277, the largest representing £10,000. He had no fault to find with the manner in which Mr Mackenzie carried out his duties of general manager of the Bank of New Zealand. Mr Montgomery n*.ked witness whether he had confidence m Mr Mackenzie as general manager ? Witness said that generally he had want of confidence in Messrs Watson and Mackenzie being together in their present positions. Not that they were wanting in ability or honesty, but because he considered it would be to the interests of the Bauk to

separate them. Mr Montgomery said wiLii"-.. had not stated whether he had confidence in Mr Mackenzie as general manager. Witness s. id he could not get away from the view he had expressed yesterday wit); regard to the state of the Colonial Bank busiu.*.*. Someone was t<> blame for that. Mr A_on.yon.erv asked witness if he had confidence iii Mr Watson a«. President of the Bunk? . . . . . Witne:-. said he held a very nigh opinion of the ability and integrity of Mr Watson, and h« waspr.ua-ed to say that generally he hid confidence in his administration oi the Bank affair*. Mr Watson was a man of very strong convictions, and in matters relating to the business between the Colonial Bank and the Bank of New Zeal-Mid 'witness always watched his opinion very closely. Witness considered that, owing to old associations, Mr Watson's opinion on these matters required to be watched. Mr Watson wa> an able man, and witness had great hope of the future of the Bank under his guidance, ire knew of no man lie would like to sec iv the position in preference to Mr Watson. Tie thought itwas desirable that the Bank of New Zealand should take over the accounts in the "B " list, with the cover provided. Owing to the discretion of die liquidators of the Colonial Bank being limited, serious financial injury would result to some of the persons whose accounts were in ihe "B " list, and he thought the Legislature might interfere in this matter. As matter:; stood at present the litruid .tors had to liquidate the accounts as soon as possible, and a man might be in a solvent position, but if he was called on to _l<»ar up his, account immediately the result might be disastrous to him. The present audit of the Bank was very certain, but be thought the appointment of an assistant auditor would lie advantageous. The Directors considered the present system of conducting tbe Bank's business was an absolutely safe one. Advances were now only made for the purposes of business, and not for investment. It was undesirable for a Bank to assume the position of a loan Company, but lie believed the Bank of New Zealand had filled that position in the past. It did not do so now. It was also undesirable for a Bank to carry on trading concerns, and whenever fair prices were offered the Bank of New Zealand would dispose of tbe trading concerns now in its possession. Witness was now thoroughly satisfied with tbe purchase of tbe Colonial Bank, and he believed it had increased the annual earning power of the Bank of New Zealand by £30,000 or more, besides removing a severe competitor from the field.

Mr Montgomery asked whether facts within his knowledge would warrant witness in saying whether the colony was likely to incur ultimate loss through the Bank of New Zealand ?

Witness said he did not think the colony was likely to incur loss, unless some serious calamity occurred to the colony. If the Bank waa well looked after, and received careful management he thought it would eventually clear off all its liabilities ; although, in the face of tho large amount involved he did not think it would clear itself in ten years. It would take a long time to dispose of the properties in the hands of the Assets Board, and the trading concerns.

Mr Montgomery—Do you consider that the disclosure of the Bank's true position through this enquiry will injure the Bank ? Witness — I know it is injuring the Bank.

Mr Montgomery—But what will the final result be ?

Witness—l think it is possible, when everything is placed before the public and confidence is restored, that an enquiry of this kind will have proved of benefit to the Bank. Under examination by Mr Hutchison, witness said since he had been Director of the Bank of New Zealand no overtures had been made by the Board of Directors for the purchase of a Bank other than the Colonial Bank. The guarantee of £25,000 given by the Colonial Bank was not included in the . coyer given for the B and C lists, He declined to say when the £20,000 was advanced, as the question had reference to private business. Under examination by Mr J. M'Kenzie witness said subsequent events proved that the umbrella cover provided for the B list was required. Witness' opinion at the time was that the amount held in reserve against the Colonial Bank's accounts was not excessive. The head officers were responsible for the positions the Colonial Bank and the Bank of New Zealand were in, and no blame Wits attachable to the branch officers. The head office must be responsible for the policy of an institution, it would have been a hard struggle for the Colonial Bank to carry on if it had not been taken over by the Bank of Now Zealand. The advance of £25,000 had now- been paid off. If the Bank of Now Zealand was to be made a political shuttlecock between two political parties it would be a very bad thing for the Bank of the country. Ho had not considered the question of the commercial part of the Bank being taken over by a Company and tiie Bank itself made into a State institution. It was a question that would require serious consideration. No member of the Government had interfered with the Directors during the progress of the banking legislation. TJndcr re-oxnruination by Mr Seddon— Witness said the banking legislation had prejudiced come of the accounts in the B and C lists, because if those accounts had been carefully nuvsed they might have been eventually brought round and paid 20s in the £. Tiie law at present did not afford sufficient provision to the Colonial Treasurer to lK'comc thoroughly acquainted with the affairs of the Bank, although he possessed great power in this regard. By this witness did not mean the private affairs of the Bank or the accounts of the customers, but ho referred to the general policy and management of the Bank. .The Colonial Bank, lie thought, had done quite right to sell its business. Mr Seddon asked whether it would be to the interests of the Bank of New Zealand and the colony if the National Bank could be absorbed by the Bank of New Zetland. Witness replied that the National Bank would be only a small bite to the Bank of New Zealand, but he thought it would be to the advantage of the Bank of New Zealand to acquire it, as its business could be worked, at very little extra cost. His own opinion was that there had been too many Banks in. the colony in the.past, and too much accommodation had been given to business people, which had led to undue speculation. Mr Seddon asked witness whether it was a fact that some of the foreign Banks doing business in New Zealand had not assets equal to their liabilities in the colony*. Witness said lie understood that was so, although he had no personal knowledge on the subject. Mr Seddon—ls it not necessary for the preservation of the thrift and the financial safety of the people that Banks should be compelled to have assets iv the colony sufficient to cover their liabilities ? Witness said there was' no doubt it was the duty of the Government to note such an occurrence as mentioned by the Premier and take steps to prevent it. The Bank of New Zealand had had to take discount business in Australia at much less rates than obtained in New Zealand. If -the Australian Banks lowered the rates in New Zealand the Bank of New Zealand would also have to lower their rates, and that would militate against toe earning powers of the lt_Uer« and the

colony would consequently run a risk of loss.

Mr M'Kenzie asked whether witness thought it necessary that members of Parliament should be prevented from dealing with the Bank of New Zealand * -, Witness said he saw no necessity for this. The Directors would look after any person, member of Parliament or anyone else, who wanted money without security. M r Macarthy, by way of personal explanation, said Mr. Booth in his evidence bad given the impression that the Directors of the Bank of Nov/ Zealand had never intended from the first to take over the accounts in the C list. He (Mr Macarthy) wished to correct this impression, and to say that no such decision was arrived at by the Board, although it was eventually found that the Bank wou-d not be justified in taking over these, accounts. This concluded Mr Micartiiy's evidence aud the Chairman congratulated him upon the straightforward and able manner in which he had given his evidence. Mr Seddon. objected to the Chairman making these invidious distinctions in regard to the various witness*'*. Although he concurred iv what the Chairman had said he still thought hi. remarks were not in good "" . The Chairman explained thac, in declining to _*ive the press representatives certain documents which bad been handed in .3- Mr Watson the other day, he was merely acting according to instructions rec ived from the Committee. It was decided that Mr Walter Johnston, tiie only other available Director of the Bank of New Zealand, should be the next witness. Mr Hutchison gave notice to move that Mr Vigers, one of the Colonial Bank liquid atots, be summoned for Thursday next, at 1.30 p.m. The Committee adjourned till 10.30 a.m. on Moivlrv.