The Press. MONDAY, NOVEMBER 28, 1910. THE STATE BANK QUESTION.

Press, Volume LXVI, Issue 13901, 28 November 1910, Page 6

The Press. MONDAY, NOVEMBER 28, 1910. THE STATE BANK QUESTION.

The Committee sot up some three mouths ago by the Legislative Council on the motion of Mr Rigg, to 'consider the advantage or otherwise of a State Bunk of issue and deposit, and of a State- paper currency, presented its report last week. The Committee after taking the evidence of severnl advocates of State banking and currency, and of representatives of tho associated banks and of the Bank of New Zealand, declares against tho establishment of a new State bank of issue, and expresses the- opinion that little or no advantage would bo gained by the issue, of State notes for ordinary requirements, though some provision should be- mado for the temporary issue of State guaranteed notes in time of panic. Tho most interesting feature of their report is, however, their expression of opinion that "n permanent and effective " partnership between the State, and " the private shareholders of tho Bunk •' of N< w Zealand,, or the acquisition of ■*• tho present shareholders' interests on '■' equitable terms by the State is desir- " able." We need not discuss just now the alternative provided in the latter part of this opinion. In the first plaso its adoption would co«t a large sum, for the present private shareholders would have to be fully compensated, and would, in all likelihood, b© able to secure more than the current market quotation for their shares. In the fcceond place, though Parliament could undoubtedly take power to buy out the shareholders in the Bank, it could not, as has Wen pointed out more than once, compel the shareholders and depotdtors to hand over the whole of the Bank's business to the State. And unless the Stjite ec.uld secure that, it would make no good bargain in paying cut the shareholders at » rate that jerould necessarily 1* reckoned on the •prolite accruing to t"h© Bank from its . private As well as -ita public business. Qα the other hand, there is much to "be jpaid in favour of tho proposal to eetab-

lish a permanent partnership between tho State and the private shareholders of the bank. There is a very general feeling that, as the Bank's profits are being made, to a very considerable extent, by tho hclj>of the money with which the State has furnished it, the State should participate equally with the shareholders in those profits. Tho hhardioldors are undoubtedly enjoying tho rise of the credit that the Government has embarked in the Bank, and art 1 reaping from it returns, in the shape of dividends, in which the (iovernment does not fully share. Much of the rostleas. and in many caseti ignorant, demand for a State Bank and State note issue, is due to this feeling and the establishment of tho suggested permanent partnership would. in a!! ?ipib;ib.'lity '.vonlfl remove ;' source <-,f irritation and jealousy. That. of emirs. , , is only one reason in favour (if tho suggestion : another one is tTiat the arrangement would lead to no disturbance of the Bank's business such, as would he caused by tho Government taking i.vcr the whole Bank as it stands, and it would check thi> dcniaml of a .section of the public for tho creation of a Sl:it(- Hank, with all the risks possibly attendant on the operations of such an in.uitat.-on. If the partnership of tho State with the shareholders would be a tfwxl tiling for the latter, it would undoubtedly bo an excellent thing for tho State to retain the private interests that, are represented by the shareholders. The (lowrnniciit appoints four out of the ■six director?, on the Board and the auditor, and as the directors elect their chairman, it follows that he, too. is one of the Government appointees. But there, is, an undoubted elomen/ o c safety in the presence on tho Board of tho representatives of the shareholders. If necessary they would rxerci~c a stendyiny influence and they fulfil vcliuible functions in the administration of the Bank's affairs. As between an out-and-out State Bank and the Bank of New Zealand with the Government pnd the shareholders in partnership, there can be no choice— tho latter would be infinitely the best a:ui safest institution from the point of view of the country. Nothing will he done in connection with the proposals of the Committee this year, and possibly next year time will be too short, in view of tho general elections, to carry tho matter any further. It is not a question to be dealt with lightly or hurriedly, .and much will, no doubt, be found in the evidence given before the Committee -which can be studied with advantage before Parliament is invited to deal with the matter.