The Press MONDAY, FEBRUARY 16, 1959. Banks In Competition

Press, Volume XCVIII, Issue 28821, 16 February 1959, Page 10

The Press MONDAY, FEBRUARY 16, 1959. Banks In Competition

The trading banks (including the State-owned Bank of New Zealand) reacted quickly to the proposal of the Post Office Savings Bank to allow non-profit-making organisations to make withdrawals, by cheque. To prevent too many of these organisations taking their valuable business to the Post Office, the trading banks have decided to pay interest on the organisations’ current account balances. Some organisations with socialist principles, such as trade unions, may be attracted by the new savings bank facilities. Most will probably see no reason to alter their arrangements, except possibly to retain larger current account balances now that the banks pay interest. It will be surprising if the Post Office picks up much new business this way, and it may try further innovations. Helpful though the cheque system will be to new and old organisational depositors in the savings bank, it should be noted that it will probably not add much to the total of savings, merely altering the place where they are held, and that the extra work cannot be done without cost to the Post Office. In fact, this looks rather like the Post Office objection to trustee savings banks in reverse, the same amount of savings having to bear a double overhead.

Because .the payment of

interest on organisations’ current account balances might be a dangerous precedent, the trading banks must have approached the matter with caution. The interest payments, most of which (by the nature of the organisations) will find their way back into current accounts, might have been a relatively minor consideration. These organisations must be particularly useful clients, perhaps deserving some special consideration. Their balances remain fairly steady, they give no trouble with bad cheques, and they do not make excessive demands on banking Service. It is worth some sacrifice to retain their substantial total balance as a basis for advancing money to other customers. Since the' attraction of deposits is the key to a trading bank’s success, the Post Office can expect further competition to be met just as resolutely. Again, this cannot be done without cost. Banking profits are not high enough to absorb any substantial increase in expenditure, so that if the cost is high bank customers will have to' meet it in some other way. Whether anyone will be much better off at the end remains to be seen. Perhaps it is a pity that the Post Office did not show its initiative in trying to increase the level of small savings, instead of in disturbing the surface.