Television will tell staff about linking of banks

Press, 1 July 1986, Page 3

Television will tell staff about linking of banks

SIMON LOUISSON

in Wellington

Trustee bank employees will find out through a special television broadcast today about plans to link 11 of the 12 regional banks. The broadcast at 7 a.m. will be followed by a news conference at 10 a.m. in Auckland where the Auckland Savings Bank president, Mr Terry Harris, will give financial details.

The plans were leaked last week by the renegade Taranaki Savings Bank, which does not wish to join the union. The plans are understood to involve setting up a holding company, which will be controlled by regional trust bodies similar

to those already controlling the trustee banks.

While 'the regional banks are likely to own shares in the holding company there probably will be a cross-link of * the holding company owning shares in the regional banks.

Legislation would be needed to amend the Trustee Banks Act, which mostly defines how trustees can work in terms of prohibitions.

However, it is believed the Government can widen the scope of commercial operation through an Order-in-Council, and this is likely to happen once a holding company has been established. Trustee banks would then be able to offer full

commercial facilities to both depositors and borrowers, although it is believed the Government will place restrictions on the Government guarantee in. respect to this type of lending.

A combined balance sheet of the 11 banks would have considerable muscle, with assets of more than $4 billion, retained earnings of $l5O million, and great strength on the personaldeposit banking. The paper losses caused by holding low interestbearing Government stock has considerably improved as a result of the recent lowering of interest rates.

Although the banks’ paper losses added up to about $l2O million at the

March 31 balance, these have fallen to almost half because of the fall in interest rates. Whether the new holding company applies for one of the new banking licences would depend on the new legislation, but the holding company would have the corporate structure and capitalisation to be able to, and amost analysts are picking that it will.

Another question which may be answered today is whether there will be any public float.

Until the banks have settled the question of the Government stock losses, which is likely to resolve itself in about four or five years, it seems unlikely that the public will be offered any shares.