ORIGINS OF N.Z. BANKING

Dominion, Volume 31, Issue 41, 12 November 1937, Page 13

ORIGINS OF N.Z. BANKING

First Banks At Kororareka

And Britannia HONOUR TO WELLINGTON (By G. R. Chaddock.) A subject that has come into much prominence but has not hitherto been satisfactorily disposed of as one of the many problems of New Zealand history, is fortunately settled before the Dominion takes into review in 1940 the completion of 100 years of banking. The question simply stated was —did Wellington or the Bay of Islands possess the first bank? Dr. Hocken’s series of lectures to the Otago Institute (1884) on the early history of New Zealand contained a statement to the effect that “the first bank was a New Zealand branch of the Union Bank of Australia.” At the time the distinguished historian spoke events were bridged by living memory, and it would appear that little in the way of confusion could exist. However, the shadow of another early institution has lain across the pages of all those who have written in later years upon the subject. At Kororareka (Russell), which for many years before 1840 was the only town in the colony, the New Zealand Banking Company was established, and commenced business in 1840.

No authorities, it appears, were eager to assign a definite date, and the Issue lay undecided as to whether the Union Bank’s branch at old Britannia, on Port Nicholson (opened on March 24, 1840), or the Bay of Islands bank, claimed or shared the honour of being the first institution to alleviate the primitive systems of exchange and barter which had existed for a very short time in the case of the one, and for an extended period in that of the other settlement. Indeed, as a detail of history, the point may not seem of great consequence, but in view of the approaching Dominion centenary celebrations, when such matters as the origins of banking and mercantile institutions are recalled, it is important that a distinction, if it can be drawn, be made, to decide whether we have a vital link with those far-off times or not.

The New Zealand Banlong Company.

Through the courtesy of Mr. John Barr, chief librarian of the city of Auckland public libraries, the eighth report of the directors of the New Zealand Banking Company, has been made available; a document which throws light where confusion existed, and at the same time gives a revealing insight into monetary conditions of the dav. From the report presented on January 31, 1845, it is possible to reconstruct the brief story. The bank “was formed in Sydney about the middie of the year 1840; at which place and in New Zealand, 4239 shares were disposed of, and the same number of pounds sterling paid up.” With this capital business was commenced in the Bav of Islands, in the month of September, 1840. (The Port Nicholson branch of the Union Bank was thus in operation for six months before another institution was established.) In April, 1841, the township of; Auckland was established, and in August of the same year a branch of the bank was opened there. A short time later an attempt to transfer .the headquarters of the bank to Auckland was “defeated by manoeuvre of some of the shareholders in the Bay of Islands, a circumstance which, on reference to the bank accounts, cannot fail to be a source of regret.” The voting in August; 1842, reversed this decision, however, and in October the head office was moved to Auckland, and a branch continued at the northern harbour. Early in 1844 it became apparent that the business of the bank. was faff too large for the paid-up capital, and though there were prospects of still further expanding business, it was deemed prudent not to call upon shareholders, but to restrict the activities of the bank. Various methods were used to reach this end, for it was obvious that the accounts of the institution were not as healthy as should have been the case; salaries of all officers were reduced and the branch at the bay withdrawn —“the amount of business had ceased to justify the expense of conducting it.” “Notwithstanding these alterations, the still necessary expenses were so burthensome, the resources of the company so extremely limited, the monetary affairs of the colony so depressed (a depression daily increasing), and the want of a connection in England and the Australian colonies so keenly felt, that your directors became convinced that it was impossible for them to carry on the business of the company. ...” For some time before the meeting in 1845, therefore, a policy of winding-up the business had been in process, and the meeting was actually called to decide upon a definite date on which the doors would be closed to the public. An analysis of

the accounts shows them to have been in no very liquid state. The disappearance of the New Zealand Banking Company from Auckland meant that the third bank to be opened in New Zealand had closed its brief career. There was no banking institution in the city until 1847, when the Auckland Savings Bank) was established, and in 1848 the third New Zealand branch of the Union Bank was opened there. Clearing away the doubt regarding the order of promotion of the first banks in New Zealand emphasises the interesting material that awaits presentation when some lively pen is attracted to the histor’.al aspect of .the subject as a whole. The conditions in New Zealand were never so chaotic as they were in New South Wales prior to the establishment of the Bank of New South Wales in 1817, but land in this country was worth about three times as much as it was in Australia and numerous private dealings were being negotiated. A letter to the Colonial Secretary dated 1843 gives a list of articles of trade which were given in exchange for one area of property. Valued at over £9OO. Ihe li<l includes polished axes, - blankets, iron pots, nearly 8001 b. of tobacco, bridles and saddles, seven horses valued at £350, and four cows at £OO. The use of cattle as a medium of exchange takes us back to the very origin of the names by which our coins are known, a period in early Roman times when they were a generally acceptable standard of exchange. Lord Macaulay’s “History of England” contains a study of the growth of the Bank of England (founded in 1694), which goes back to conditions obtaining in London when New Zealand was first discovered by Tasman (1642). During the centuries following, English banking was being established on those foundations of security for which it is noted to-day, and it is especially interesting for us to note the entry of a British joint stock bank into New Zealand in 1840, taking its place in a community newly established with some of the comforts of the old civilisation, but still from a commercial point of view having this element of barter which was an echo of a very primitive society.