DECISION RESERVED IN BANKING INQUIRY

Press, Volume CIX, Issue 32252, 21 March 1970, Page 46

DECISION RESERVED IN BANKING INQUIRY

(New Zealand Press Association)

WELLINGTON, March 20. The Trade Practices and Prices Commission which has been conducting a public inquiry for a fortnight into current-account banking charges concluded its hear ing today and reserved its decision.

; The Commission is Mr [R. D. Jamieson (chair-! /man), Mr F. F. Simmons /and Mr B. F. Anderson. ; Mr J. D. Dalget.v appeal’s /with Mr L. M. Greig for 'the Bankers’ Association; Mr G. S. Orr, with! him Mr E. J. Batt, ap-: I pears for the Examiner ; of Trade Practices. At no time had the banks suggested that their level of I profits was so low they could not afford to compete. Mr Orr itold the commission in his summing up. The level of the banks' profits made competition entirely feasible, Mr Orr said. Over: the last few years, controls on the banks had been considerably relaxed. Repeated allegations that] banks’ charges did not cover! the cost of running the; icheque system ignored the! 'fact that the cheque system !attracted the better part of! the banks loanable funds. “User Pays” There was nothing to stop ] individual banks devising! 'systems based on the “user! [pays” principle, nor had there!

•■been anything to stop indivijdual banks from devising a i better system. ’ A more flexible system. . readily in line with the user ; pays principle, could have . been adopted by the individual banks, he said. The argument that smaller ] customers would be penalised [if there were no collective

i- agreement was highly un a I likely, in view of the import ance to the bank of these cus i, tomers. They would be fre< r to go to more favourable e banks. I- The banks would work foi more revenue from increasec i- business if they lowered theii 1 charges. e Mr Orr felt that the bank; would give their individual charges the widest publicity they could. “If the banks dk not disclose their charges I this could lower the competi live impact,” he said.

Responsibility Denied The Governor of the Reserve Bank (Mr A. R. Low) had denied any responsibility for the scheme eventually arrived at by the trading banks,, Mr Orr said It was clear that I 'the Reserve Bank was more! 1 1 concerned about whether I monetary policy was involved., The scheme, he concluded, .was completely rigid. Mr Dalgety said the evi-‘ dence established that collecItive fixing of bank charges] was overwhelmingly in the' , public interest. It also established that the! community would probably be worse off if the system intro ! duced by the collective agreeiment were struck down and competition in bank charges permitted, he said. The Government and the Reserve Bank had weighed ,the public interest involved ‘in the change from one uniform system to another and had raised no objection. ' Although there had been! criticism from individuals! and groups, this had been! ] predictable. They had been! ■ making substantial use of the < | cheque clearing system in the; ! past without contributing! much toward the cost. Profits “Meagre” Large financial institutions] which had been called upon to | pay more under the new sys-1 item, such as the trustee sav l ; ing banks, the Public Service: Investment Society and the! electrical supply authorities/ had been critical of uniformity because it prevented them , from using their financial; strength to obtain more ad-i vantageous bank charges. . The banks’ profits were; meagre by any standards in | spite of their high level of! efficiency, Mr Dalgety contended. It was clear from the evidence this was due to the impact of Government controls on their earning capacity. The recent liberalisation of controls over the trading banks had not gone very far. lit had freed the banks’ de-

- posit rate but then had no - given them an opportunity t< ■ make some profit from it. ! The prices of bank charge: ! would tend to rise rather that fall or remain stable, he said ; ilf the Government had beer ■ opposed to the new system I the banks could not anc [ would not have introduced it