RESERVE BANK

Dominion, Volume 27, Issue 38, 8 November 1933, Page 10

RESERVE BANK

Reply to Mr. A. N. Field OWNERSHIP OF SHARES Statement by Mr. Coates The article by Mr. A. N. Field published iu yesterday’s "Dominion,” in which he contended that the amendment to the Reserve Bank of New Zealand Bill designed to restrict the* ownership of shares to British subjects ordinarily resident iu New Zealand, was totally ineffective, was replied to last evening by the Minister of Finance, Rt. lion. J. G. Coates. Mr. Field had asserted that transfers of shares subsequent to allotment could be made to anyone, irrespective of nationality, but Mr. Coates points out that transfers cannot be made to foreigners or non-New Zealanders. “My attention,” said Mr. Coates, “litis been directed to a statement byMr. Field that the clause in the Reserve Bank Bill restricting shareholding to British subjects ordinarily resident in New Zealand, is an ineffective one, since he contends that no provision has been made for the restriction of the transfer of shares to foreigners. I am afraid that Mr. Field has been no preoccupied with his researches into the activities of foreign financiers that he has omitted to make himself fully conversant„ with the provisions of the Reserve Bank Bill which passed the House of Representatives on November 2. While I am not as fully concerned as is Mr. Field with the fear of foreign control, I have made it my business to see that there are no loopholes in the sections relating to shareholding and directors.” Details of Restriction. Mr. Coates said that clause 6 of the Bill restricted shareholding to British subjects ordinarily resident in New Zealand; the subsequent transfer of shares was dealt with in rule II of the first schedule to the Bill, which stated, inter alia, “that the bank shall decline to accept, (a) any transfer of shares except to a British subject, who is ordinarily resident in New Zealand, or who, having been so resident, is at the time of transfer temporarily out of New Zealand for the purpose of his business or for other 'sufficient reason; and (2) any transfer of shares that would increase. Ujc holding of .any person beyond 500 shares.” This rule further stated that “the bank shall be entitled, without assigning any reason, to decline to accept any person whomsoever as the transferee of any share.” It would be observed that the change that Mr. Field wanted was already iu the Bill. “In the first place,” Mr. Coates continued, “the allotment of shares will be supervised by the Minister of Finance. The intention is to serve the person of small means first. We shall welcome applications for shareholding in small amounts. The more people we can get with one or two shares in the Reserve Bank, the better will our purpose be served. Wc want the roots of 1 he bank to be well spread throughout the community. The shares are £5 each, £1 being the amount payable on application. ’When the shares are allotted the man of small means will get. first consideration. I might mention that we have already received several applications for shares of small amounts. Limit of 500 Sliares. “The new Bill provides that no man can hold, ou behalf of himself or other people, more than 500 shares; nor can he exercise more than 500 votes whether in his capacity as proxy or shareholder. Shareholding will be national; only British subjects ordinarily resident in New Zealand can be shareholders ; transfers cannot be made to foreigners or non-New Zealanders. In fact, there is the right to decline to allow transfers of shares even to persons in New Zealand who the bank may have reason to believe should not be the transferees of shares. Trustees cannot- hold more than 500 shares for beneficiaries. A shareholder, to be able to vote, must lie the registered holder of his shares for at least six months. “The shareholders will have four representatives on the board of directors of the Reserve Bank, two of whom shall be persons who are or have been actively engaged in primary industries and two in industrial or commercial pursuits, These people will not represent: sectional interests, but will bring an intimate knowledge of New- Zealand needs to the board of the Reserve Bank. “The directors, including the governor and deputy-governor, must be British subjects by birth; they cannot be members of Parliament, employees of State departments or employees in the service of any other bank, except that there is provision for one director of another bank to be on the board provided that the State or the shareholders deem it necessary.” TRANSFER OF GOLD Associated Banks’ View REPLY TO MINISTER Stating that some points in the statement of the Minister of Finance regarding the banks’ gold holdings printed in yesterday’s “Dominion” called for immediate reply, the Associated Banks made the following official statement:— “The Minister’s statement that 'no interference with the property or the legal rights of the banks would be involved in removing this restriction’ (i.e., inconvertibility of notes) is inconclusive insofar as the case is not fully explained. “The present proclamation would expire in the ordinary course in January, 1935, but the Reserve Bank will come ! into operation before that date, and I its notes will be legal tender; the banks I will then be able to acquire from the Reserve Bank (by selling to, or discounting with, the. Reserve Bank some of the Treasury lulls they bold—aud will hold) a sufficient quantity of Reserve Bank notes to retire all their own notes as and when presented, without requiring gold for that purpose at all. The banks could then hold their gold until the proclamation expires, where- , upon, in terms of the proclamation, the prohibition on the export: of gold will also ecase. "The Minister is also reported as having stated that it was the ‘Government action, or action taken on the re- ' sponsibility and if necessary at the ■ cost of the State’ that 'has raised the value of gold in terms of currency.’ The reply to this is that it was not the action of the New Zealand Governm>nt that increased the world price of gold, which is the result of world condi- ' tions. The Banks’ Offer. “In the conversations with the banks it was the world price that was named by the banks, not that price plus the depreciation of New Zealand currency.

“Without departing from the opinion that the gold coin and the value of it is theirs, the banks have offered to the Government to accept from the Reserve Bank sterling in London for their gold coin, that is £1 sterling for each sovereign. (In such conversation it was agreed that the banks would exclude this sterling from the operation of the Banks Indemnity Exchange Act.) As it is clearly the intention that the Reserve Bank should ship the gold abroad —the Niemeyer Report advocates that and the Reserve Bank notes are to be based uot on gold (none need be held) but on sterling—the Reserve Bank could acquire about 50 per cent, more sterling than it paid to the banks. On, say, £4.500,000 of gold it would win, say. £6.750.000 sterling, or £2.250.000 above the sterling paid to the banks for their gold, and under the Reserve Bank Bill this £2,250.000 would accrue to the Government, and its value in New Zealand currency on the present rates of exchange would be. say, £2.500.000, nearly £3.000.000. “The Finance Minister says he does not know of banking authorities who have expressed contrary opinions to that formed by him and his advisers, but. his memory is nt fault in this, for he has been told that the six general managers of the banks doing business in New Zealand hold contrary opinions, that the boards of those six banks do too. and they are probably just as well able to judge as those who father the opinion which the Finance Minister advances. “A Wrongful Action.” “It. is evident from the opinions expressed by leading papers and by numerous well-informed bodies and individuals throughout the Dominion that the expropriation of part of the value of the banks’ gold is recognised by very many as a wrongful action. If the Finance Minister believes otherwise, he does not seem to be in essential touch with the minds of that responsible section of people upon whom the well-being of the community so largely depends. “It has never been disclosed to the banks exactly how the Government has presented its case to the authorities upon whose opinions it relies. Throughout all the controversy it has •been felt by the banks that, if the case of the Government has been presented with the same disregard of essential facts as exhibited in its published statements here, a proper and complete consideration of the question has not been possible.” “AN OPEN MIND” Attitude of Mr. Coates REPLY TO MR.’J. T. GROSE The statement made yesterday by the chairman of the Associated Banks, Mr. J. T. Grose, in connection with the question of the gold reserves, was commented upon last evening by the Minister of Finance, Rt. Hon. J. G. Coates. Mr. Coates said the attitude of the banks generally and of Mr.. Grose as chairman of the Associated Banks had been helpful and was appreciated by the Government. Despite some difference of opinion on details, all‘except one of the commercial banks had agreed with the Government and with practically all authorities in urging that a Central Reserve Bank should be established in New Zealand. It was on the question of gold profits that Parliament differed from tho banks, said Mr. Coates. There were apparently still some points to bo cleared up. In respect to the present inconvertibility of the trading banks’ notes, he had already pointed out that the banks had no established statutory rights to the continuance of such inconvertibility. Tlie notes were in the hands of tho people generally, who, under both pre-war and war legislation, were entitled to ultimate redemption in gold. The Associated Banks omitted to point out that the legislaion, tinder which the proclamations regarding inconvertibility were issued, provided that the banks might be required to give adequate security “that they shall pay their notes in gold on demand after the expiration of the period limited by tlie proclamation.” Retirement of Notes. “The Associated Banks now submit,” said Mr. Coates, “that under the provisions of the Reserve Bunk Bill they could retire all their notes by. another method and retain theit gold until /he proclamation expires, whereupon they state the prohibition on the export of gold will cease. Their suggestion overlooks several vital factors. First, it is an important recognised principle that all gold coin or bullion held by the trading banks should be taken over by the Reserve Bank in order that it might be made available to perform its proper function in the currency mechanism, and the Bill provides for this to be done. “Secondly, the Bill contains provision for tlie introduction and maintenance of a new type of legal tender notes, but it is hardly correct to suggest tliat such introduction is intended either to affect the principle of the Reserve Bank taking over the whole of the gold reserves or of so relieving the trading banks of their responsibility as to enable them to claim any share in the adventitious profits that may arise as the result of Government action. “Mr. Grose takes exception to my contention that ‘Government action’ lias been responsible for raising the value of gold in terms of currency; That was my statement, and I am pre-, pared to substantiate it. My words were carefully chosen; I was speaking by the book. Facts of I lie Case. "What are the facts? They are that the excess value of gold, expressed in terms of New Zealand currency, is due, first to the fact that English sterling is off gold and secondly to the fact that our New Zealand currency is off sterling. Both of these circumstances are the direct result of Government action, as I stated. Of course, tlie one is due to the action of the Government in the United Kingdom and the other is due to the action of the New Zealand Government. Likewise, steps taken by other Governments have raised the price of gold. It is therefore very evident that no refutation of my original statement is contained in Mr. Grose's comment that ‘lt was not the action of the New Zealand Government that increased the world price of gold. I made no such statement. “Mr. Grose ended by remarking that the Government: here had presented its case with a disregard of essential facts. 1 cannot agree. No essential facts have been disregarded in the Government s statement of the case. In addition to this, I have clearly stated in the House that I have unopen mind to consider any now facts or evidence that may be produced. PROTEST’ENDORSED Chamber of Commerce View i Endorsement of the resolution passed at the public meeting in the Town Hall on Monday protesting against the Reserve Bank Bill was given by the

Council of tlie Wellington Chamber of Commerce last night. The president, Mr. A. D. Kerr, moved and Mr. D. J. McGowan seconded the following resolution: —"This Council of the Wellington Chamber of Commerce gives its full support and endorsement to the resolution carried .. . and urges on the Government its favourable consideration of the resolution. The council further directs that a copy of the resolution lie forwarded immediately to the Prime Minister, the Minister of Finance, and the leader of the legislative Council.” Mr. Kerr mentioned another resolution similar to the one at the public meeting which had been passed by the Wanganui Chamber of Commerce. .Mr. W. B. Matheson: “I agree with this one, but. the resolution passed yesterday covered too much ground alto-, get her." Mr. IV. 8. Cederholm: I would like to point out that actually the resolution was not passed. The chairman called for the ayes, hut not for the noes. The motion was then carried.