BANK OF NEW ZEALAND BILL.

Press, Volume XLIX, Issue 14822, 13 November 1913, Page 13

BANK OF NEW ZEALAND BILL.

» DEBATE IN THE HOUSE. (rit-SS ASSOCIATION T-I.KCRAM.) WELLINGTON, November 12. In the Houso of Representatives this afternoon, tho Hon. James Allen, Minister cf Fiuance, in moving the : committal of the Bank of New Zealand Bill said, with regard to the million guarantee, that a proposal had been made that the Government should renew the guarantee. There, was a difference between ihe directors and shareholders, and that' difference had been overcome, and there would now bo no serious opposition to the progress of the Bill. Whatever may have been the'rights and wrongs at the State's connexion with the Bank (and he thought tliat that connexion had added to its stnbiiity), it was in a prosperous &tate to-day, aud they could say to the English .shareholders that the State was behind the Hank, and that everything in that direction was wholly satisi actory". A proposal had now come itown for the renewal of tho guarantee of a million pounds. It had been made perfecuy char, by an appeal to the Uoiuts, that tho iiank's capital couid not bo increased witnout tno aid of Parliament, and that was now facing dono. Tno state's interest in the iiank was as one to ono, ana that would no preserved in tho l>ill. Regaiding the issue ot new stock, the question to b. d-ierrr.ined had been tho position regulating tho interests of the State and tne shareholders ot the Bank. The dividend on B preference shares would bo the same as tnat on ordinary shares. 1} preference shares would be the first call after A preference shares on the capital of tbo Bank. That put tho (State on n very much better footing than previously. Tho maximum shares the State could acquire was one. million out of a proposed three million, and the maximum premium provided was 100 per cent. So long as the Bank rcmidned as it was, belonging mostly to the* shareholders, it was unwise to havo tho Uank brought continually on the

floor of "tho House. Tho power of veto by the Minister was retained, and he had exercised it during tho past two months. It was an enormous weapon in the hands of the .Alinister. The power of tho auditor was also retained. Continuing tho debate at the evening sitting*, Sir Joseph Ward said he could not lielp recalling the epoclv-'mak-ing happenings of October 19th, 180-1, when ho introduced legislation affecting the Bank, which, at that time, was in a particularly low state- That legislation saved the Bank of New Zealand. At the present time only twelve of the members who voted on the Bill were in tho House. To-day, the Bank was so strong, and its position was so good, that it was a compliment to all concorned. He paid a tribute, to the name of John Murray for the good work accomplished by him in connexion with the Bank. It was a good thing for the country that tho Bunk was attached to tho State, and ha'would say that ho aporoved of tho proportion of directors -r-four Government and two shareholders directors, though ho would not bo averse to increasing both by two. It was not expedient to make lav4_c changes in such a large institution as the Bank of Now Zealand. It would have been better to have called up one-half the amount proposed. Instead of ono million being called up, it would have been wiser to have left £1 13s *_d uncalled, that applied to both shares.. It was, in his opinion, a mistake to havo U nominal capital of three million when it was not proposed to titiliso }t all. In connection with tho State's relations with the Bank, and the movement for a Stato bank, ho mentioned that ho agreed with the Minister that whilo we had ono million sunk in the Bauk of

New Zealand and 500,000 shores, and probabilities of another million being advanced, which meant practically two - and a-half million, apart from current _ account, the State's interest wero well preserved, and thero was no

• necps-ity for tho' Stato batik. Tho very 1 I account", tho State's interests was ho I necessity for tho State Bank. The very ■ life blood of this young* country was s cheap money, and it must be recogised , that cheapness of money in future would bo controlled by banking institutions. It would be a good thing if tho Bank of New Zealand wero to set the way in the matter of minor reforms. 1 Ho instanced the chargo of 10s for ■ keeping accounts, arid held that that • should not bo imposed. Tho Bill, on tho ■ whole, was framed on safe lines, and : would assist tho Bank to become a greater institution than it was at pre- • sent. , Tho "Hon. W. Fraser congratulated ! Sir Joseph Ward on tho temperate speech he had delivered, not allowing party considerations to weigh with him in any way. It was a wise thing that ' tho Government came to the assistance of tho Bank in 1894, not to save the

Bank, but to protect tho fivo millions of investors' money locked up in the Bank, and which must neccssariy havo remained ocked up for many years, as they all knew how long it took to wind ~ up the assets. In reply to Sir Joseph l Ward, ho claimed that it was not proposed tp call up the whole of the million and a-half of now capital if it was not wanted, but what they desired to do was to avoid coming continually to the Houso for fresh power. His only fear was that they were making tho Bank too independent of the House, hut in view of the proportionate power which the State had on the directorate, the House could be kept in the closest touch with tbo Bank's affairs, and necessary legislation could bo introduced at any timo. The recovery of tho Bank of New Zealand was one of the most remarkablo incidents in bank-

ing history, and this legislation'would tend to make it stronger than ever. Tho Hon. J>. Buddo said tho fact that the Bank of New Zealand had built up its handsome reserve fund since iy_4 was proof that there were few more profitablo businesses than banking. He quoted the. profits of other hanks to substantiate this statement, and urged that concessions should be mado to the public in the direction of remissions on exchange on cheques. Interest on deposits at call should also be paid. The Hon. James Allen: They will not giro that. Mr Buddo: "I know they will not if they can get out of it, but we should compel them to give it." If the Bankdid not show greater consideration for ■ its depositors, it would be found that depositors would drift towards local bodies and large mercantile firms, which were rapidly taking up tho receiving of deposits on call and paying interest on them. The Hon. J. A. Millar declared that the Bank was asking for too much capital. No bank in Australasia was trading with such a large capital as was here proposed. In view of the assistance given to the Bank by the State, a greater share ' of the ' new capital should be given to the State. The new issue was going to do an injustice to tho present shareholders hy depreciat> ing the value of their shares, and when in committee Jie would move io'pat that right. He strongly denounced the practice of allowing mercantile firms, to take decosits on call, as unless it was controlled in some way by legislation, there would be a most disastrous panic in this Dominion some day. Mr EU put in a plea for a State Mr Gr W. Russell pointed out that the shareholders' interest in tho Bank's capital was only half a million, yet with this small investment tlie Bank made*a net profit of £382,530 last year, and was able to pay a 15 per cent dividend, in addition to which it had built

up its reserve funds out of profit. To the Bid as a whole little exception could be taken. There was piovision for fresh legislation during the next twenty years, and then would .conio. the opportunity of discussing the qiiesiiou of making the Bank a Stato bank. Personally, he could see no reason why tho Government should not purchase Bank shares on the open market, and so convert tho Bank into a Stato institution without any revolutionary process. Half a million could bo borrowed on the London market and invested in this way at a handsome profit. The arrangement made with tho Bank was a satisfactory one, and the Government was to he congratulated on bringing the Bill down. The House then went into Committee on the Bill, and progress was reported on passing the short title.