INTERNATIONAL BANKING.

Press, Volume LXIV, Issue 19310, 15 May 1928, Page 10

INTERNATIONAL BANKING.

(WBITTEK TOE THE PBESS.) (By the Commercial Expert of the "Economist.") British Currency Developments. During recent weeks the Bank of England's reserve of gold has been steadily expanding, awl to-day the proportion of its. reserve to liabilities in the Banking Department is approximately 40 per cent. This is the highest proportion for some years past, and in fact is in the neighbourhood of the figure ruling in pre-war days. It is noteworthy that part of the Bank's recent additions to its reserve has apparently been drawn from internal sources. The" improving tendency of the Bank's gold position has focussed attention upon the prospects o." finally regularising Britain's currency position by transferring the Treasury (or currency) notes from the Treasury to the Bank of England. This is part of Britain's official monetary policy, and an official committee reported that the country would be ripe for the change "early in 1928"; moreover, developments since the issue of this report suggest the desirability of early action. It is reported that Mr Churchill will announce the transfer in his forthcoming Budget speech, but official confirmation is lacking. Nor is this the only element of uncertainty in the position. For instance, which system of fiduciary issue will be adopted? Will the present fixed issue be replaced by a fluctuating issue? This question has excited some controversy, for banking opinion is divided. Some bankers, pointing to the extent to which the fluctuating system obtains among the world's central banks, would prefer to see it adopted in this country, or at least they urge an official enquiry, wh;a would deal with the relative merits of the two systems. It is probable, however, that the majority of bankers favour the retention of the fixed system. At any rate, the Chancellor of the Exchequer has refused to conduct an enquiry and this fact, combined with the recommendation of the Committee on Note issues in support of the Med system, is read as foreshadowing the transfer of the. notes on the basis of the fixed fiduciary system. Neither system is without faults, but it seem? possible so to plan the unification o; our note issues on the basis of the fixe- bystem that the faults will not cons.nuto grave defects in the country's tuancial organisation. Despite the uncertainties in the situation, safe to assert that the Bank of England will not engage in a scramble for gold a backing for the combined note issues. British Banks' Foreign Policy.

The most curse ry survey of British economic and financial literature in recent years discloses the anxiet J " t Britain to increase lier export trade Many stimulants have been aevised suid not the least important has been the foreign policy of the leading Britisfi joint stock banli and particularly the "big-five 1 * banks. In pre-war dajs they were somewhat conservative and were inclined to leave foreign banking to the London branches of the foreign banks. But immediately after the war they completely changed their policy by establishing foreign branches unfamiliar countries, chiefly France, Belgium, and Spain. This move was forced upon the banks by the dgsire to accommodate their domestic customers with the facilities for which in prewar days they had been mainly dependent upon the London branches or the foreign banks. . This change of policy gave rise to certain misgivings, but experience lias shown that they were not entirely justified. For instance, the fears of native banks regarding competition have proved for the most part unfounded and the relations between the British branch banks and the native institutions have, on the whol© been cordial. Again, in the main the business appears to have been profitable. But it is clear that the foreign branches have had to encounter formidable difficulties. This is especially true so far as taxation is concerned. It would seem, indeed, that there is a tendency for th© British banks to limit their activities in this direction. Certainly there are few signs of expansion and in some cases branches have been closed. But it is probable that the British banks will make considerable efforts to retain their existing contracts with foreign countries, foi competition among the British banks is very keen and thesis foreign contracts have undoubtedly proved a valuable service to British traders. In 1926 one of the "big-five" banks —namely, Barclays—inaugurated a new. phase of Dominion banking policy by the formation of Barclays Bank (Dominion, Colonial, and Overseas) which consolidated under the auspices of Barclays Bank several important African and British West Indian banks.

Bankers and Instalment Selling. Instalment selling has recently assumed increasing importance in Great Britain, though Britain remains far behind those counts-• - which it is most highly developed. In these circumstances, it is not unnatural that it should have attracted the attention of our bankers. Their views are of the first importance, for they have a vast experience of many forms of credit. There is some difference of opinion among British bar>— on this rubject. Mr McKenna, the chairman of the Midland Bank, is noted for the independence of 1p« "litlook, and this quality is not absent from his views on instalment selling. The "remarkable thing to me," he says, "is not the great increase in instalment selling, but the great increase, in public attention which is being given to it." He refuses to be alarmed, for he declares that "I do not think that the development of the instalment plan of selling is one which we need regard with anxiety.'' The majority of British bankers do not regard instalment selling with equal complacency. They are no doubt largely in agreement with the more cautious views of Mr Hugh Tennant, the chairman of the Westminister Bank. There is, he says, "infinitely more risk here of loss or intermittency of employment than on the ott"-~ - s flp of the Atlantic. Under such circumstances there is clearly danger in encouraging the weekly wage-earner to contract debt obligations and to mortgage future sav'ings. Another consideration which goes t.o support a counsel of caution ia that the instalment selling system has not, since its Mg de-elopment in the United States, as yet hn<l to stand the crucial test of a serious business depression Thus, although the development is one we must watch with interest and care, there are abundant reasons why we should hasten slowly in the extension of it in our own country." There is undoubtedly much sound sense in this view.

FROZEN MEAT. The New Zealand Loan and Mercantile Agency Co., Ltd., have received the following cablegram from London, under date 11th lE New Zealand Frozen Meat —Lamb: Market steady. Mutton: Heavy-weighcs id dearer. REGENT THEATRE, LTD. The flotation of the Regent Theatre, Ltd., has been accomplished successfully, the allotment of shares having been made last week.

GIBSON AND HOWES, LTD

Gibson and Howes, Ltd., saiga?* grower, of Queensland, and sugar miller", shows a net profit for 1927 of £36.019, as ugainßt £21,918 the previous year. The dividend and bonus are at the rate of 10 per cent., as against a dividend of 8 per cent, for It-?,'l, and absorb £28.000, a sum of£Booo is added to the reserve, and £370 is carried forward against £350 brought forward. The depreciation reserve shows an addition of £7961. A comparison of accounts follows: Year ended Dec. 31. 1926. 1927. £ O Net profit .. 21,913 36,020 Dividend, p.c. .. g *io Dividend, amount. .. 22,400 *2B 000 To reserve .. B^ooo Forward .. 350 370 Liabilities— Capital .. .. 280,000 280,000 Reserve .. .. 12.000 12,000 Depreciation .. 25,830 34.791 Creditors and provision for taxation .. 10,826 18,594 Assets — Freehold, buildings, plant, rolling stf.ck, shares in other companies . . . . 248,417 255,611 Commonwealth stock 1 5,910 15,910 Stocks .. .. 56,590 63.544 Debtors and cash .. 17,488 32,689 * includes bonus of 2 per cent. The report states that prospects indicated in the previous report of a satisfactory crashing were realised. As the company is a large grower of cane the caneflelds results materially contributed towards the profits. The final price of raw sugar of 94 net titre for 1926 season was £24 10s lOd per ton. The base price for 1927 was £2l Is. and it is anticipated that the final price will approximate £2l 12s lOd. or £2 18s per ton below the final price of the yea? previous. The prospects of crop for the crushing season are said to be fair. Considerable expenditure is being undertaken in the mill to increase the output and quality of the work.