No knowledge of bank’s problems—Labour heads

Press, 31 May 1977, Page 17

No knowledge of bank’s problems—Labour heads

P A Hamilton Labour Party leaders have denied any knowledge that the collapsed Securitibank was having liquidity problems as far back as November. 1973. They were reacting to an assertion by the Prime Minister (Mr Muldoon) that the then Labour Government had failed to act in investors’ interests. The Opposition spokesman on Justice (Dr A. M. Finlay) and the former Minister of Finance (Mr R. J. Tizard) said that they were unaware of Securitibank liquidity problems when they were in power. Mr Tizard said that the Prime Minister was "being wia eafter the event.” Mr Muldoon had said in Parliament that if Dr Finlay had not known of Securitibank's liquidity problems when he had been Minister of Justice, he had not been doing his job. Dr Finlay had moved a private member’s notice of motion questioning the morality of the Government’s actions in connection with the merchant bank’s collapse.

He had charged that, by remaining as a publicly advertised investor in the Securitibank consortium, the Government had given unjustified confidence to other investors. Government Life and State Insurance had shareholdings in the bank. Dr Finlay said later that Securitibank had made an approach to the Reserve Bank when his party had been in power but the merchant bank had not faced liquidity problems at the time. “The whole point is that the present Government should have held an inquiry into Securitibank operations last year when liquidity problems were revealed.” he said. "Some investors who entrusted their money to the bank may have avoided involvement. “If an inquiry was held at the appropriate time, the bank’s problems may not have been activated.” Doctor Finlay said that in November, 1973, Securitibank was still making a profit. “There was no question of Government action being called for,” he said. Mr Tizard, who became

Minister of Finance in September, 1974, said that the Leader of the Opposition (Mr Rowling) had had discussions with Securitibank in 1973 over its activities in the short-term money market. He’said that he had had no dealings with the bank during his own time as Minister of Finance. “A lot of companies were facing liquidity problems after the 1973-74 import boom,” he said. ‘‘Their problems became acute when export prices started to fall. ‘‘The thing that knocked Securitibank was when the Government increased interest on Government stock to 9 per cent in March last year. All the existing stock lost some of its value.” A few days after Securitibank went into liquidation, the Prime Minister said that the main cause of the collapse was that the company had been involved in many i transactions which had I not matured on the dates 1 set. The December collapse of the bank left an estimated 10,800 creditors wanting more than SI3M.