Down The Years With The Trading Banks

Press, Volume CI, Issue 29942, 2 October 1962, Page 13

Down The Years With The Trading Banks

Banking in New Zealand has played many parts, cast as it has been in its traditional role of basic financial institution over the last 120 years. By the mid-1870’s most banks now operating in New Zealand had begun business.

The Union Bank of Australia started something significant on the spring day when it opened its own and New Zealand's first trading bank branch on Petone Beach, on the northern side of Wellingtons majestic harbour. then Port Nicholson. Although a move was soon made to the less exposed anchorage of present-day Wellington, the oil painting of "Jacky Box Smith." the bank's manager, sitting possessively atop the safe on the raft which made the transfer across the harbour, provides a colourful reminder of a New Zealand commercial milestone.

Today the five trading banks have almost 1000 branches and agencies, and a combined staff of 8000 servicing and lubricating components of New Zealand's commercial and financial system. They processed 80 million cheques worth £6OOO million through bank accounts last year, in addition to other wide-ranging services, some not widely known, they provide for New Zealand.

Banks have had their exits as well as entrances in New Zealand. The Oriental Bank Corporation, one of six banks which either closed or were taken over, “must be very sore about leaving New Zealand in such times,” wrote a rival bank manager of the discovery of gold in Otago in 1861.

The term “bank” may not be a very romantic one —it derives from the Italian “banco," a bench. But banking can still weave a tapestry of engaging memories and human interest amid the library of ledgers and driedup rivers of writing and printing ink which have recorded the pulse of New Zealand's growing stature. Gold Bush Days

The Kororareka office of the New Zealand Banking Company, which wound up after five years, was destroyed in a Maori uprising in the early 1840's. Trading banks serviced the Otago gold rush, with the miner's natural preference for the easily portable bank note against the more cumbersome, and more tempting, gold metal or gold dust

The discovery of gold gave banking an impetus as well as a firm foundation in New Zealand. Buying and shipping of gold bulked large in the early years of banking, the pattern of which has changed in the twentieth century. Miners dug up more than £25 million worth of gold from the gullies and riverbeds of Otago. Thames and the West Coast in the 10 years after the discovery in Otago. Today trading banks work in friendly competition; but on the gold fields relations sometimes became strained as bankers scoured the diggings for business. Two banks refused on one occasion to accept the hastily-printed notes of a third bank, so the manager had to hot-foot to Dunedin and return with 8000 sovereigns by escort wagon to restore confidence. With a saddle bag full of gold and silver for a pillow', and an uncertain sky as a canopy, the bank agent of the goldfields had it somewhat worse than a manager of more recent times whose family was so big that he was always tilling the bank garden for food and had to conduct interviews alfresco style.

The experience the banks gained on the goldfields consolidated their qualification to help finance the development of New Zealand's farmlands, encourage the commercial

growth in towns and stimulate its overseas trade. Something more than gold was necessary to sustain the early growing economy and the boom petered out w’ith the fall in gold production in the 1870's. Though the export value of wool rose from £67,000 in 1853 and £2.7 milmillion 20 years later, the boom had given away to depression.

Prices fill for the next two decades to 1894 and banking fortunes reacted in sympathy with the economy. Borrowing by the Government, immigration, Vogel's railway development provided an unstable base for continued prosperity.

Speculation had sent land and urban property values up to unreal levels and provided a precedent for the circumstances leading tip to the great depression of the 1930'5. Banks and other commercial organisations had insufficient strength to sustain losses caused by the fall in overseas prices and general values. The crisis of the nineties resulted in emergency legislation, the State guarantee of help for the Bank of New Zealand and a share of control, 50 years later to be made complete. All banks were forced to reorganise capital. In 1890 advances exceeded deposits by £2 million, but by 1900 deposits exceeded advances by more than £4 million, and this provided the base for the ensuing move forward. Banks moved, with-

out great disruption through the First World War, which was noteworthy for the withdrawal of gold and the consequent increase in note circulation.

Banking made steady progress in the period after the post-war difficulties, and at least one historian is prepared to argue that the one thing that held New Zealand back from the black chaos of a financial cataclysm in the early thirties was the strength of the banks and wisdom and ability of their administration. Exchange Bates Banks were not unanimous on the exchange rate alteration of 1933 and viewed with mixed feelings the consolidation of the financial system by the establishment of the Reserve Bank in 1934. If the Reserve Bank and growing Government control has taken much of the romance out of banking and the importance of banking in the economy has declined, a banking career today offers even greater rewards than it did in the past. With banks today leading in office automation, which takes so much of the drudgery out of clerical work, it is somewhat ironic to read of a bank in 1898 criticising the purchase of a typewriter. Besides the transfer of the right of note issue to the Reserve Bank, trading banks have suffered increasing restrictions in their role of provider of short-term and working finance. The general level of interest rates the banks may charge is controlled, and the ratio policy —the drawing off of banks’ cash to the Reserve Bank to control their lending—is applied more Strictly in New Zealand than elsewhere.

With the general subordination of monetary policy to fiscal policy, the climate is further provided for the increase In scope and type of operations by other financial institutions. But in spite of this there is a widespread and growing use of the banking system in New Zealand. Banks believe in a •thrifty New Zealand and stand ready to assist by any feasable means in implementing this ideal.