Bank Advances At New Peak

Press, Volume CIV, Issue 30760, 26 May 1965, Page 1

Bank Advances At New Peak

(From Our Own Reporter)

WELLINGTON, May 25.

The Reserve Bank decision to tighten bank credit policy has been made because bank advances have reached their highest figure ever about £lB million more than the peak in any other year.

No method exists at present by which the Government or any of its agencies can apply ratios to fringe lending institutions such as stock and station agents or finance corporations to reduce the volume of their lending.

The purport of the request to the trading banks to restrict advances to pay for imports is to ensure that advantage is not taken of the greater freedom given in the new import schedule to obtain goods financed by overdraft. The decision to free art silks, cottons and textiles could involve another £lB million a year in imports. The intention is that as far as possible such relaxation should not be taken advantage of by obtaining overdrafts rather than purchases

financed by importers’ cash. If, for example, new importers without cash reserves were to obtain licences for only a tenth of the amount involved in the relaxation, some £2 million would be added to the overdraft figure. A Treasury spokesman said there was a record figure for overdrafts, according to the Press Association. He said the tightening of bank credit was in line with Government policy to restrict bank advances to a target figure. “These figures are set by the Economic Committee of the Cabinet from time to time —but the figures are never published,” he said.

“At the moment we are very concerned because bank advances have reached the highest total ever.”

He said there had been unusually heavy overdraft requirements last month in fields such as wool brokerage and freezing companies. [Earlier Reference P. 14.]