BANKER’S VIEW

Press, Volume CI, Issue 29900, 14 August 1962, Page 20

BANKER’S VIEW

Interest Rates “Too High” (From Our Commercial Editor] WELLINGTON. Aug 11 Present rates of interest in the short-term money market are too high, in the opinion of Mr J T Andrews, chairman of the New Zealand Bankers’ Association "Dealers are currently paying about 3% per cent for call money, whereas trading banks are tied to 2 per cent on three months’ fixed deposits and 3J per cent on 24 months’ fixed deposits." he said, when asked by “The Press” to explain how the operations of the market were affecting the trading banks

“Now that complete freedom with regard to interest rates has been conceded to all non-bank financial institutions, the disparity between bank interest rates, which are still controlled and those generally ruling outside. can no longer be ignored.’’ Mr Andrews said “Overdraft rates are low in relation to other lendine rates so that customers do not want to borrow outside the banks Take the case of a substantial flrm with ample security wanting finance for a building and being asked to pay 6t4 per cent on a mortgage It would obviously prefer to borrow from its banker at a substantially lower rate, but official advance control policy rules this out

“Government oolicy is thus inconsistent On the one hand banks are forbidden to lend for capital purposes: on the other hand the pattern of lending rates encourages customers to rely on overdraft rather than outside finance

"The short-term money market has aggravated this distortion in interest rates and highlighted inconsistencies in official policy.” be concluded