Barriers Seen To Banking Progress

Press, Volume CII, Issue 30125, 8 May 1963, Page 17

Barriers Seen To Banking Progress

(New Zealana Press Association) WELLINGTON, May 7. Main barriers to banking progress in New Zealand were the attitude of the public? of politicians and successive governments, and of the banks themselves, said the research director of the New Zealand Bankers’ Association (Mr J. W, Rowe) at a meeting of bankers tonight.

"Let us admit frankly that banks in the past have failed to do some things which they should have done, and today are still not doing many things they should be doing.” he said. “If we set our own house in order and at the same time tell people what they are losing because we are shackled, we can expect a rapid change of attitude on the part of our political leaders. “Trading banks today cannot simultaneously increase their advances and deposits except as agents of the Government —or if such a simultaneous increase does occur. for reasons beyond their control, they are effectively penalised by having to pay 7 per cent, on the officially unwanted excessive advances. “We may thus regard the trading banks in exactly the same light as other financial intermediaries. Actually. trading banks are worse off because any accretion to our deposits due to Reserve Bank credit creation or higher overseas prices is sterilised by the Reserve Bank, whereas savings banks, etc., seemingly acquire virture by immediately lending any deposits they receive as a result of either the Reserve Bank’s activities or ours. “In other words, we are not normally allowed to extend our lending at all when our funds increase, although we have to service a higher level of deposits. “Banks Blamed” “Probably the worst feature of recent governments in the monetary field has been their tendency to blame the trading banks for economic mismanagement which is largely the result of their own inadequate policies Buck-passing is of course to be expected, but nevertheless it is unpleasant to be landed with it all the time. “Few bankers today would deny the need for credit control, including controls over trading-bank lending, but in New Zealand, as in many countries, commercial banks have been unjustifiably burdened with controls, whereas most other financial institutions have been allowed to go scot-free. “This is partly the result of an unthinking carry-over of past attitudes towards credit creation, etc., but it has also shown signs of being prompted by profitcontrol motives. This is also outdated, since nothing is surer than that bank profits

today are too low, rather than too high. “In any case, it is rather silly to control bank profits by preventing banks from competing with other less efficient financial institutions, when it would be much simpler to levy a special tax on them. “Of course, to justify their position as kingpins of the financial system, the banks must have the right calibre staff with the right skills. Staff training and development must therefore receive even more attention than they have in the past. This is especially so today with the rapid progress here. “Somehow a new spirit of thrusting enterprise has to be injected into banking in place of the frustration complex so often seen today,” he said.