Take-over of Rural Bank rejected

Press, 30 December 1988, Page 3

Take-over of Rural Bank rejected

PA ' Oamaru The member of Parliament for Waitaki, Jim Sutton, has rejected the idea of a farmer take-over of the Rural Bank and suggests it should consider closer links with other financial institutions. Mr Sutton said the bank should merge with or be taken over by one or more financial institutions with strength in other areas. He said yesterday that farmers could benefit from foreign involvement in the bank but the Government should be cautious over the buyer. His comments follow suggestions that farmers should take over the bank, which dominates large parts of the rural economy. “Making subsidised loans for farm purchase and development available through the bank helped drive the price of land and the level of farm debt to unsustainable levels,” he said. “It also drove other financial institutions out of the farm sector and left them without rural sector expertise.” More financial institutions should compete for business in the rural sector. Increased competition had already brought interest rates down, Mr Sutton said. Farming was a cyclical business, subject to unpredictable shocks. “In these circumstances it would be foolish for farmers to seek to own a bank specialising in, and dominating, rural lending,” he said. “This would only ensure that the bank’s ability to accommodate farmers’ credit requirements would be lowest at the time when the need was greatest.”