OUR BANKING INSTITUTIONS.

Daily Southern Cross, Volume XVII, Issue 1438, 24 September 1861, Page 3

OUR BANKING INSTITUTIONS.

Pending the opening of the Bank of New Zealand for public business, it may be instructive to glance at the present aspect of banking in this colony, and thus infer the influence the system h»s had on the trading community which it purports to serve. We do so in the best spirit towards existing institutions, ■which have been conducted with judgment and success hitherto. Neither do we wish it to be supposed that we desire to establish a monopoly in favour of the Colonial bank about to be opened, under most favourable auspices, for we consider a banking monopoly as among the most execrable engines of coercion that could be devised in matters extern to commerce, besides often tending to clog entei prise when it ought to be encouraged Our object is simply to point outto the tmlingcommunitythe tendency of the piesent system to diain the country of its wealth, and by management, natural under the circumstances, to keep up a perpetual tightness and uncertainty in the money market, and thus create a never failing source of levenue to the bank pi oprietaries whose only interest in New Zealand, as bodies corporate, is to make the greatest per centage of piofit with the least expenditure of capital. That such has been the case hitheito, the bank returns amply testify; but for all practical purposes the returns for the half year, ending on the 30th June, 1861, will be sufficient to quote as illustrating this position. We shall scan these quarterly. By the returns ended March 31, 1861, the Oriental and Union banks had in circulation in New Zealand promissory notes, payable on demand, amounting in the aggregate to £105,795. The deposits, within the same quarter, amounted to £619,352 Bs. 6d., thus making a joint liability of £725,147 Bs. Gd. This sum was balanced by £161,317 12s. in specie ; or in other words, the Oriental and Union banks were debtors to the colony to the extent of £563,829 16s Cd The joint discounts, during the same quarter, are given in the returns at £641,208 lls. Id., which must be averaged at nine per cent, per annum, over the whole colony. Now this yields, for the March quarter, a revenue of £14,427 2s. 9d , or to take round numbers, at the rate of £57,700 per annum. This revenue has undoubtedly accrued from using the deposits in lieu of capital, for it will be recollected that the specie in hands, after meeting the claims on the paper issue, only left a surplus of £55,522 12s. for the quarter, a mere trifle when compaied with the large discount business transacted during the same period. But even that small sum cannot be looked upon as altogether unencumbered, for however well a bank may be managed, losses will be contracted in the course of business, which the per centage of profit by waste of the paper currency cannot entirely balance. On this head alone, therefoie, a portion of the surplus of specie over notes in circulation must be written off. The profits on exchange, and personal and other securities in the bankers' hands are great ; but still the main fact remains that the discounts may be said practically to be done by the deposits alone.

Thus it will be seen that the banks increased their liabilities to the public to the extent of £49,520 65., during- the quarter ended June 30, while the increase in specie amounted to £57,152 5s lid. This is easy of explanation, if we compaie the deposits and discounts for the two periods under leview. Thus —

Tke increase in the amount of specie might be thus accounted for, the return of deposits for the quartei being £8,431 4s 7d. in excess of the increase of coin in the coffers of the bank offices, and there being a deciease of £26,479 2s. Bd. on the discounts. It will be seen, however, on a closer inspection of these figures that this is not the true solution. The deposits for the quarter ending June 30, amounted to £614,729 Ss 5d , and credit being given for £218,469 17s. lid of specie, the net liabilities of the two banks will be leduced fiom £831,820 os. sd. to £613,350 2s. 6d., or within £379 ss. lid. of the amount of discounts ' In fact, the deposits absolutely covered the discounts during the quaiter ended June 30, 1861 ; and the increase of specie was no doubt caused by the laige ciedits the coinmissaiiat opened with the banks about that time. Truly, we have been a profitable speculation to the bank proprietary who hitherto did us the honor to transact business in this colony; but having thus expressed our gratitude, we feel no compunctions of conscience in declaung that it is high time this ruinous diain on our resouices should cease. While it continues we need never expect to piogiess with that rapidity which should mark the history of a colony so peculiarly favoured by Providence at New Zealand. Having thus analysed these retiuns, we will refer for a moment to the p\ofit on deposits oi discounts, which appear in this case to be conveitible terms. In round numbers, as we have said, we will take it at £57,700 per annum. The average increase, suppose the present system to continue, would be at the rate of 9 per cent. ; and every school-boy knows that money lent at 9 per cent per annum doubles itself in eleven years and forty days, so that weie tins sum alone allowed to accumulate interest at the per centage named, in somewhere about twenty-five years it would amount to the paid up capital of the New Zealand Bank ; while about half that period would suffice to accumulate the average amount of specie held by the Banks now in New Zealand. Twenty five years is a short space in the commercial history of a country, and these facts should cause the matter to be the more closely looked at. This is not all, however. Not only is £57,700 abstracted from the circulating medium, and together with its increase, at the rate of £5,193 per annum hopelessly lost, but the same sum is abstracted annually, so that interest altogether apart, the colony is a loser, in ten years, of the capital sum of £577,000 — £77,000 in excess of the proposed capital of the Bank of New Zealand, and over three times the capital employed by tba English and Australian banking companies to conduct their business in this colony ! We leave our readers to follow out this interesting calculation, and we doubt not that they will soon satisfy themselves of the imperative duty of supporting an institution which will have the effect of retaining this specie in the colony, thereby increasing the wealth not of the proprietary alone, but of the inhabitants of New Zealand generally. Let it not be supposed that any portion of this revenue finds its way back to the country. A moment's reflection will show that this is not the case. The returns prove that the specie has always been kept at the happy medium between £160,000 and a quarter of a million ; being regulated to a nicety, as the compensating balance between deposits and discounts and the equivalent to- the notes in circulation. And this again points out the necessity- for a more expansive system. The ligaments which bound our commerce, have been too tight hitherto. It is evident that our requirements could be calculated 1 to a nicety. Provision was made for actual wants, but there was little hope for inci easing the accommodation. The banks had their customers, who were not allowed to overdraw their accounts. The natural consequence of

this wag that private bill discounting was resorted to ; and the very same securities which satisfied the private individual for his risk would have been forthcoming to the banks if they had chosen to *ct on the cash credit system in any instance. But this they did not choose to do. The bank subsequently discounted the same paper at a lower rate than was paid for the private accommodation, to the loss of the drawer, who virtually paid a double discount. Thus, much has been done to retard private enterprise, and hinder the colonization of the country, while a perpetual suction was applied to the vital fluid of commercial life among us, to »a« tiate the maw o! a non-resident proprietary. The Oriental proprietary, like good gospel Christians, at " the very appearance of evil " withdrew from the colony ; and it was rumoured in August last, that but for the political news brought by the English mail, the old and highly favoured Union Bank would have applied the screw a little tighter, and declined all new paper. We cannot blame the management for this. Their object was to make money so long as they could, and to avoid all risks. But let us suppose for a moment that the Union proprietary, like the Oriental, had withdrawn their offices from the colony, and that the Bank of New South "Wales had not succeeded them, in what hopeless confusion would our commerce have been involved. Nothing but absolute chaos could have ensued. Th's subject is not exhausted, however, and we shall revert to it again. "We will only add, that in view of all the circumstances — the drain on our resources, the want of an expansive management, which is not possible with foreign banks having branches here, the necessity to encourage the enterprising tiader, mechanic, »nd settler to develope the wealth of the colony — it would have amounted to little short of a total recklessness of present good and future advancement, if the capitalists of New Zealand had not united to establish, for their own ])ro« tection, a Bank of New Zealand.

March June Decrease | Increase £ s d £ sd £ sd Discounts 041,208 11 1 614,729 8 5 2(5,479 2 8 Deposits 619,352 8 6 C55,q35 19 0 £ s d 65,553 10 6

Oriental Bank, Dr Notes in Circulation £30,908 13 0 Deposits . . 121,898 13 5 162,805 6 5 £831,820 0 6 Cb —Union Bank, specie . £163,519 911 Oriental Bank, „ 6i,950 8 0 218,469 17 11 Total liabilities over specie . £013,350 2 C

Note 3in circulation Deposits Union 3 Bank, Dn £114,977 8 5 504,037 5 7 £070,014 14 0

These remarks apply, with still greater force to the returns for the quarter ending June 30, 1861 .. — •