AGRICULTURAL BANK

Dominion, Volume 16, Issue 148, 10 March 1923, Page 3

AGRICULTURAL BANK

MR. POLSON’S SCHEME CON-

DEMNED

Financial opinion in Auckland inclines to take tho scheme of Air. AX. J. Polson, president of the New Zealand Farmers’ Union, for an agricultural bank, as something fantastic, states the “Star.” Of several authorities seen, one put pungently what manj- said in effect. “It is absolute rubbish from a financial point of view. In the first place, no respectable bank ever lends money on shares. It would be a very wrong principle in finance for any bank to lend against its own shares —and that is the condition of advancing money with '/the proposed concern, in fact the first condition. There’s not only one, but there are dozens of objections to tho proposal, as far as I can judge. A redemption of | per cent, or even 1 per cent, would never wipe out loan and interest in from ten to’ thirty years. The whole thing is ill-advised. I do not know who could have been responsible for such a scheme-yccr-tainly-no one who had any experience in banking could ever have seen the draft. If the capital is to qome solely from borrowers, as indicated —a» seems to be indicated —the whole position would be. an absurdity—borrower lending to borrower!” Another opinion was more cautious. “There will be great difficulty in regard to the proposal that sharebold ers in the ‘bank’ shall be jointly and severally liable pro rata for any loss made bv the bank. Few shareholders would shoulder such a responsibility. There would, I imagine, be very great difficulty to obtain funds for a start. And how will there be cont.-ol over deposits? If loans were in demand it would place the bank in a very awkward position. If they were to call this concern a land association or something of that sort it would nrobably help matters —but a bank! The term is a misnomer. The first essential of a bank is to look after the safe‘v of its sharehnklcrs and its depositors’ money. The bank must he assured that a rcaonable percentage of its loans shall be repaid within a reasonable period—if or on demand. Assets must' lie kept more or less liquid. In this scheme there appears to bo no provision for this. It seem’ an ideal scheme for State Advances or a. ‘land association.’ but. it is not banking business, and that seems tho whole objection to a bank.”