MONEY INQUIRY

Press, Volume XCII, Issue 27734, 11 August 1955, Page 2

MONEY INQUIRY

“LOANABLE FUNDS” „ SCHEME MR OTTO QUESTIONED (New Zealand Press Association) WELLINGTON, August 10. For trading banks to operate on the “loanable funds" principle, it would be essential to induce customers to switch their money from current account to fixed deposit, said Mr W. S. Otto, an Auckland businessman, to the Monetary Commission today. Mr Otto, replying to Mr G. G. G. Watson, a member of the commission, agreed that fixed deposits might have to be increased substantially. When he said the interest rate on fixed deposits would need to be increased to something like 4 per cent, to attract money from current account, Mr Watson suggested that the rate, to be effective, would need to be “a good deal more." Questioned by Mr F. W. Holmes, who is assisting the commission. Mr Otto agreed that there was nothing in his scheme to prevent banks reducing their advances and investments as they saw fit. If customers tended to divert their savings from fixed deposit to current account, the banks would have to adopt a tighter advance policy, he said. ITtough plans for capital investment and for savings must be made in advance, he did not believe this would involve anv real difficulty.