Trading Banks Told To Intensify Credit Squeeze

Press, Volume C, Issue 29637, 6 October 1961, Page 12

Trading Banks Told To Intensify Credit Squeeze

■ (N.Z. Press AsgoctMvmi WELLINGTON, October 5. The Government has asked the trading banks to intensify pressure to achieve a reduction in bank credit. The Prime Minister (Mr Holyoake) said tonight that tighter bank credit could be expected to continue “well into next yeah, at least” Mr Holyoake also announced that, by adjustment of ratios, the banks will be required to borrow more from the Reserve Bank at the current penal rate of interest, which is 7 per cent.

"The Government has been emphasising recently the urgent need for measures to reduce the rate of spending in New Zealand so that balance can be restored to the economy,” Mr Holyoake said. “For some -months past the trading banks have been contributing to this policy by adopting a tight lending programme, which has meant that many applications for advances have been declined. “But the results hive been disappointingly slow, and the Government has, therefore, asked the banks to intensify the pressure. “This will apply both . to applications for new or additional credit limits and to existing credit limits and programmes of reduction. “Such a policy is necessary in the circumstances, and in carrying it out the banks will have the full support of the Government.” Mr Holyoake made it clear, however, that the Govern-

ment had asked the banks that pressure to reduce overdrafts would not be such as to compel the sale of stocks of goods which should be conserved. Every effort would also be made to see that the essential production possible within the limits of resources was not impeded by a refusal of normal credit “In support of this policy it has been decided that, by adjustment of ratios, the banks will be required to borrow more from the Reserve Bank at the current penal rate of interest of 7 per cent.,” he said. “The amount of such borrowing varies from day to day, and it is now proposed that the figure shall fluctuate around £2O million, instead of around £l5 million, as was the practice until recently. “The banks have been assured that the amount of borrowing from the Reserve Bank will be reduced by appropriate changes in the reserve ratios as, and when, bank advances move at a satisfactory rate towards lower levels.”