BANKING IN NEW ZEALAND

Dominion, Volume 21, Issue 223, 21 June 1928, Page 9

BANKING IN NEW ZEALAND

(To the Editor.) Sir, —Sir Robert Stout is renorted in your columns to have stated at the Bank of New Zealand shareholders’ meeting that the rate of interest on mortgage in the early sixties was 17$ per cent. I landed in New Zealand about ten years later and found things pretty much as he has stated.

Sir Robert Stout’s statement is true enough, as far as it goes, but it is not the whole truth by any means. If a. settler got behind with his interest, 15 tier cent compound interest soon forced him into bankruptcy, and there being practically no sale on such terms as the bank could offer, the bank was literally “snowed under” with forfeited estates and was forced to run them itself at a loss in nearly all eases. The bank itself was compelled to form various companies for the liquidation of these properties, but to no purpose, and when the Bank of New Zealand, in extremis, was just upon the point of closing down, Mr. Seddon, the then Prime Minister, came to the rescue with his “Assets Realisation Board” in 1894 and saved the bank and the colony from financial disaster. It seems a great pity, as Sir Joseph Ward remarked in the Council last session, that the New Zealand Government did not take over the bank as a State institution at that time. As it was, Parliament had to come to the rescue, re-establish the bank’s financial position in London, and practically take over the management until the State’s credit over and above the Government share capital taken up were redeemed. Now, Sir, I do not think that in the above I have exaggerated, and, moreover, the trend of matters financial for some years now has forced me to the conclusion that we are being gradually sagged down into tire pre-’94 position. What we want above all things financial in New Zealand at the present time is a bank that will not allow its shares to run to a premium on the market. Whenever a bank finds its share capital going up bevond par value on the market it should at once reduce its rate of interest, and vice versa “when the pendulum swung the other way,” so as to keep the share capital at par value as near as possible. Otherwise the bank is forced, as per your financial columns, into the position of having to make a liberal interest on about £5O a share with only £5 of the shareholders capital to make'it with. —I am, etc., AXIOM. Taihape, June 18.