THE BANK OF NEW ZEALAND. THE COMMITTEE'S REPORT.

Evening Post, Volume L, Issue 51, 28 August 1895, Page 2

THE BANK OF NEW ZEALAND. THE COMMITTEE'S REPORT.

The galleries and Home were crowded but night, large numbers being turned away from the doors. The non-produotion of the report was a terrible disappointment to the public The ' Committee rat till midnight last night, and again at mid-day to-day. When the House met at 230 p.m. the Minister for Lands announced that the report was not quite ready, but if the Speaker eft the ohair for half an hour it would probably be brought np at the end of that tune. Tbia course was agreed to. The House met again at 3 o'olook, and passed an Imprest Supply Bill through all its stages. later on the Committee presented the following report : — The Committee appointed to enquire into and report upon the Bank of New Zealand estates Company and its relation irith the Bank of New Zealand, to enquire how, in the colony' b interest, the two institutions can best be separated, and how the earningpower of the Bank of New Zealand may be inoreased, its stability insured, and its usefulness extended, have the honour to report as follows :— Before proceeding to investigate the several matters referred to it by both Houses of Parliament, your Committee received from the Colonial Treasurer the following letter, addressed to him by the direotors of the Bank of New Zealand, which explains why Parliament has been called upon to deal with the question :— "Bank of New Zealand, , _ " Wellington, 17th August, 1895. "I have the honour to quote, for your information, the following minute passed by the Board of the bank at a meeting held this morning— ' Parliamentary Committee to enquire into the affairs of the Bank of New Zealand Estates Company and the Bank of New' Zealand, with a view to separating the Estates Company from the Bank,' and inoreasing the earning-power of the Bank. ' Besolved, To plaoe on record that it was the desire and expressed wish of the direotors, made at a conference with Ministers, that this Committee of both Houses should be appointed.' "Ihave.Ao., "W. Watson, "President." " The Hon. the Colonial Treasurer, Wellington. Your Committee have, tince appoint? pent, been continuously carefully engaged in going into the several matters referred to, and have had before them the President of the bank, Mr. Watcon ; all the directors of the Bank of New Zealand ; the Auditor of the Bank, Mr. Butt; Mr. Poster, the General Manager of the Estates Company ; Mr. Lyon, until reoently employed as manager of several of the properties of the Estates Company; Mr. M'Kerrow, Land Purchase Inspector; and -Mr. M'Gowan, Commissioner of Taxes. Tour Committee have had before thorn balance-sheets of the Bank of New Zealand, balance-sheets of the Estates Company and of the Anokland Agricultural Company, ooni. bined balance-sheets and statements oonoeraidg the bnaineta of the bank and of the Assets Company, which are appended to the report. Your Committee find that the present direotors of the bank are not responsible for the present unsatisfactory condition of affairs. The Committee oonsider that the present direotors have acted efficiently since they took offioe.and have oandidly and fully given every information to the Committee. There is a defioienoy of- £376,900, and a , contingent dependency of .£200,000 in the.' bank. There is a deficiency of .£467,077 in the Estates Company, against which no assets exist, and a further defioienoy of .£444,601 in trading conoerns and properties outside New Zealand. These altogether amount to ,£1,488,578. Of this sum, -£148,110, whioi, though shown as a liability, is really a debt due Dy the Agricultural- Company, and represented by assets — deducting this from the aforesaid sum of .£1,488,578, there remains .£1,310,468.,. This is provided for as follows; — Capital, bank ' ... £900,00i9 Estimated amount of call ... 450,000 ' .£1,350,000 leaving a balance of .£9532, which goeß to a. dependency account. Your Committee are pf opinion that, in the present financial oiroumstanoesof the colony, and taking into consideration the financial position of the Australian Colonies, and also considering the magnitude of the interests, both publio and private, which are involved, as well as the widespread disaster that wonlo, follow shonld the bank be compelled to sns> pend operations, the colony shonld rendev euoh assistance to the bsnk as will restore confidence, insure stability, and enable it to oarrf on its business in a satisfactory and profitable manner. The Committee h of opinion that any assistance should be of an effeotive and definite character. In support of the Committee's opinion, it may be stated that it has been found that, apart from any indireofc injury to the country, the following interests would be directly affeoted by any disaster to the bank :— As will be seen from returna annexed, there were on the 31st March, 1895, in New Zealand, the other colonies, and London, deposits in the Bank of New Zealand to the number and amount as follows ;— Depositors. Representing New Zealand ... 35,110 .£5,032,900 Other colonies ... 2,839 530,223 London 3,351 1,578,632 Totals ... 41.300 £7,141,755 This includes Government deposits amounting to £1,145,396. Ihe total number of advanoes by the bank on the 31st March, 1895, and the amount of same in New Zealand, the other colonies, and in London , were 'as follows : — Advanoes. Amountingto New Zealand ... 15,593 £5,428,222 Other oolonies ... 1,277 £1,463,516 London 137 300,915 Totals ... 17,007 £7,102,653 The shareholders in New Zealand number 1050, liable for £403,000. There are 115 branch banks, and 28,584 current accounts. '] he disoountaooount, representing traders' acceptances, equals £456,000. The Colony of New Zealand, independently of the "A" stoolt,- £2,000,000, and remit. tanceß in transitu, is oreditor to the bank for £1,403,000, the amount in New Zealand being £458,000, and in London £945,000, From the evidence taken and the balancesheets submitted it will be found that the Bank of New Zealand and Estates Company, though two in name, are praotioally one institution; that tiie Estates Company and the Auokland Agricultural Company, though under different nameß, are practically one oonoera; and that the combinud Estates Company, Anokland Agricultural Company, and Bank of New Zealand are practically one oonoern. The division i» in name only, because the whole of the shares in the Estates Company are owned by the Bank of New Zealand, the only interest held outside the bank being the debenture-holders who reoently aoquired five hundred thousand pounds' worth of the debentures previously held by Baron Schroder, and the debentureholders of the Anokland Agricultural Company, who held £282,960 worth of debentures. Your Committee is of opinion that it would be in the beat interests of the colony, of the; shareholders of the Bank of New Zealand, and of all concerned, th«,taseparation|of th(S affairi of the Bank it New Zealand and the Estates Company should take plaoe. la dealing with so momentous and intricate a question it is necessary that every preoaution shonld be taken to safeguard the colony against losses, and to render future application for the intervention of Parliament unnecessary. To effeot this, your Committee recommend that the whole of .the freeholds, leaseholds, stations, stock, and implements in New Zealand be disposed of, and that the Bank of New Zealand and Estates Company sell them to a Realisation Board, to be estab. lished for that purpose. 'That an Assets Realisation Board, consisting of three members, be oreated as hereinafter provided. ' That the Assets Bealisation Board b« authorised to issue bonds for £2,734,000; ■ Rearing 3} per oent. interest, and thfct the deficiency, if any, on these bonds, after the realisation of the' New Zealand Estates Company "s" properties, be guaranteed by the oolony to the bank. In return for these, the Bank of New Zealand, the New Zealand Estates Company, and the Anokland Agricultural Company to transfer the whole of the property referred to the Bealisation •Board for liquidation purposes. , -That £500,000 of uncalled reserve liability of the Bank of New Zealand shareholder* ba palled in four equal instalments, the firflt being payable on the '30th Junei 1896, Tttj second on tha 31st Deoember, 1896, the third! on the 30th June, 1897, and the fourth on the 31st Deoember, 1897. That, to enoourage the shareholders of the -. Bank to meet the call of £500,000 proposed to be made, your Committee reoommend that the first oharge on all annual profits of / the Bank beyond £50,000 per annum should ' be a payment of interest not exceeding" 5 per bent, on amount paid by. shareholders on the oall as aforesaid. • * •' That the Bank of New Zealand, ont o£ its ~ profits, pay to the Assets Board" ' hesum of £50,000 per annum as hereinbefore mentioned, and any further sum 1 whldh max remain£after paying 5 per oent, to ordinal? shareholder* until any deficit on realisation » provided for. ■ • ' ' <•' , ' ' Your Committee are of opinion that th« last valuations of «tations and landed pro>erty may, under favourable oiroumstanees, be maintained, but the more prudent course would be to 'allow for farther 'depreciation.' 1 ' That, to insure the oolony against any los* on aooount of guaranteeing any' deficiency that may arise on bonds, in addition to the' payment* from profits above' provided for; leonrity bs given over the freeholds, leaseholds, stations: ctock, and implements in New Zealand, the bank's latest ascertained value of whioh is £1,879,000, and over the 1 , second oall of £500,000, and also over the balanoe £500,000 of the uncalled reserve liability of the bank shareholders. ' ~ ' That the first oall, the. last payment of whioh is due on the 26th November next; estimated to amount to £450,000, together with the preient paid-np capital', amounting to £OOO.QQO, oe, written off to 1 provide "fok losses, of whioh £1,150,000 is for ascertained losses, and includes £9558 which is proposed to be held as' t, dependenoy, and £200,000 as * contingency for unascertained lomV In conjunction with this 'proposal, and to enable adequate capital to oe provided, for the bank to carry on it* buaineu and restore its credit, your Committee reoommend the colony to subscribe £500,000 for preferential shares, bearing Si per cent, interest, and thai tb»y be paid/or by the iuue of 31 per oent. stock to -\iim bank, the bank to 'have tha tight to purchase "any or all of thaw sham provided they are. sqld, pracent bank shareholder? to have priority. ,^ This, with the £500,000 of camtarfrot! the aeoond call of the reserve liability, tHI give the Bank of New Zealand a dear capital of £1,000,000 sterling. In addition to ibis the position of the Bank will be strengthened by having the whole of thr

£2,000,000 0f "A" stock for use in its ordinary burineu. Under the altered position that the Bank will occupy, these proposals, if given effeot to, will put it on a sound basis. On investigation, your Committee ascer. tamed that the aeoond million " A " Stook, now invested according to law in liquid securities, entails a heavy annual lose on the Bank. To prevent thia recurring loss, and in order to increase th earning power of the Bank, your Committee recommend that the million be freed and made available for übo in the Bank' a general business. And to further enable tho bank to inareaee its earning power, your Committee are of opinion that the bank should be at liberty, if deemed advisable, to aeonre further trade by pnrohaaing other banking business, but that no purohaae be allowed unles. with the sanction of the Governor in Counoil. And that, to enable this to be done, section 3 of the Banking Aot, 1894, be repealed. And further, with a view of increasing the earning-powev of the bank, the Committee reoommend that the colony's business in England be transacted by the Bank of New Zealand . The directors of the bank are of opinion that, if these recommendations he given effect to, the net eaming-power of the bank will be so increased aa to leave a profit of £135,000 per That, in consideration nf the £500,000 preferred ahares to be taken up by the Government, the colony should have further representation, -and that the Governor-in-Counoil be empowered to appoint one direotor, , . ' 'Jn," r „« That the Aaaejg Bealiaation Board sh*H oonaiat of three members, and, inasmuch as' the colony has guaranteed the defioieuby, if any, on the bonds to be issued by the said Board, the Governor in CcmnoU shall appoint two members and the directors of the Bank of New Zealand one member. The Committee are of the opinion that the ■hareholden of the bank Bhould be prohibi. ted bylaw from winding up the bank until the whole of the obligations to the colony are repaid. Thia ia an obvious precaution, oonaideting the large responsibilities of the bank to the Oofeny. And the Committee alao recommend that the power under The Bank Guarantee Aot, 1891, be amended, so that the power to appoint a Beoeiver shall arise on any default of the bank. The proposals of the Committee deal only with the landed properties, stations, stock, implements, Ao., in New Zealand. The trading oonoerna, both in and outside ' New Zealand, and the properties^ owned by the Estates Company ontafde JNew Zealand, are not to be transferred to the Assets Bealiaation Board. The direotora of the Bank of New Zealand have informed the Committee that the hitter properties may be realised in two years. The directors have so far written down in value that the Committee -1b of opinion that there need be no delay in carrying ont those immediate realisations. The details of the trading concerns have not been appended, as they are for sale, and it would be inadvisable to furnish all the details connected with them. WithAhe papers appended to" the report will be lotea a scheme submitted by the direototaoftne Bank of ' New Zealand. 'The Committee did not see its way to accept it, seeing that it entailed heavy obligations upon the colony whioh the circumstances of the case did not warrant. The Colonial Treasurer also submitted a scheme, the distinot feature of whioh waa that the colony did not direotly ibsub stock to the bank aa against the assets of the Estates ' Company," but. in lieu thereof, M a lasfjxeoonrie, the colony guaranteed the defioJejKjy, on the bonds. Sir Bobert Stout also plaoed before the Committee certain resolutions. Theae will be found with the papers appended to the report: Chas C. Bowbn, Chairman. At 7.30 thia evening the -Bill to give effeot to the Committee's finding will be brought down and gone on with till passed. It is olaimed that a majority for -the BUI ia assured. Should it be speedily passed it ia probable that the House will adjourn till Tuesday to permit members to visit the Ghriatchuroh exhibition.