Rural Bank to be corporatised?

Press, 15 May 1987, Page 13

Rural Bank to be corporatised?

PA Wellington The president of Federated Farmers, Mr Peter Elworthy, caused some confusion recently by announcing a firm date for the corporatisation of the Rural Bank, then later saying he had made a mistake.

Mr Elworthy was speaking at the launching of the Federation’s election year strategy document, and said the announcement had been made that the Rural Bank would become a State-owned enterprise on April 1 next year. He said the federation had had discussions with the bank and other parties about what sort of bank farmers wanted. But when asked about his announcement later, he said he had made a mistake.

“I thought it had been made public but I obviously erred in that it has not been made public, and that it was not the

decision,” he said. He would not comment further. Mr Elworthy’s original comments, that corporatisation was definite, were put to the general manager of the Rural Bank, Mr Ray Chappell, who refused to confirm a date, saying there were “a few matters to sort out.” But the assistant general manager in charge of the bank’s lending, Mr Arnold Snodgrass, said that though no formal decision had been made by Government, the bank was preparing itself to become a state corporation, and was working toward a date of April 1, 1988.

Mr Snodgrass said the final announcement would be made by the Government.

The Minister of Agriculture, Mr Moyle, was unavailable for comment, but a spokesman said Mr Moyle was unaware of

any imminent announcement on the Rural Bank’s status.

Mr Chappell said several months ago that the board had asked the Government to make the bank a State corporation. Another senior Rural Bank official said a final decision may depend on the state of the agriculture sector and what role the bank might be expected to play in implementing Government policy. A senior Treasury official, Mr John Chetwin, said the bank had mainly been an instrument of Government policy in assisting the rural. sector, which was why it had not made much money. Mr Chetwin said if the bank were to become a State-owned enterprise it would have more: independence in its policies on borrowing, lending and interest rates, most of which the Government

now had some control over.

He said the main asset of the bank was its lending portfolio, which it would have to buy from the Government if it were to be run on private enterprise lines. Other Treasury officials said full conversion of the bank to a corporation would have to be looked at carefully because the viability of an institution with all its eggs in one (agricultural sector) basket could be questioned.

The officials said it would be riskier than an institution with its assets spread more widely across the economy, and it would certainly be riskier than the Bank of New Zealand or most other finance houses.

Its advantages, the officials said, would be in its expertise in lending to the rural sector.