THE BANKING ENQUIRY. MR. MACARTIIY'S OPINIONS AS TO THE PRESENT MANAGEMENT.

Evening Post, Volume LII, Issue 93, 10 September 1896, Page 5

THE BANKING ENQUIRY. MR. MACARTIIY'S OPINIONS AS TO THE PRESENT MANAGEMENT.

The Banking Committee of Enquiry lppointed by the House of Representatives resumed its investigations at 10.30 Ibis moruinp. The examination of Mr. T. G. Macarthy by the Premier was continued. The witness said that at the close of the negotiations for the purchase of the Colonial Bank— at the final stage— the directors of the Bank of New Zealand were unanimous in their agreement to purchase. In the previous stages of the negotiations witness and Mr. Booth were not favourable to the purchase under the conditions then stated. Regarding the £20,000 investment, the President of the Bank of New Zealand was partly to blame in connection with this, as it would not have been made but for some representations made by him whioh did not turn out correct. Mr. Watson had made statements to the directors, and after results had proved that he was in error. Witness would not say that Mr. Watson had done anything to wilfully mislead the directors. In witness's opinion Mr. Watson ought to have known more about this £20,000 investment when he made it, and also about the £5000 investment. Excepting for his lack of knowledge concerning these no blame attached to him x in connection with the two investments^ Witness meant by this that Mr. Watson, fr,om his connection with the Colonial Bank, ought to have known more about the investments. In discussing the question of the appointment of Mr. Mackenzie, _as General Manager of the' Bank of New- Zealand. Mr. Watson was the most pressing or the directors who desired the appointment. Owing to the position in which they had found the affairs of the Colonial Bank, a minority of the directors were opposed to the appointment. Mr. Mackenzie, as General Manager, had to take his share of the responsibility for the position of the Colonial Bank. The Bank of New Zealand was in a worse position than the Colonial Bank, but he did not consider the present officers of the Bank responsible for this. From what he knew and what he had heard he, understood that the losses of the Bank of New Zealand were due to the management at headquarters. His opinion was that material losses of the Bank , of New Zealand were made prior to 1890, though they might have been increased by injudicious treatment. He had come to the conclusion that Mr. Mackenzie was partly responsible for the position of the Colonial Bank because of the result of the investigations made, which was much different from what they had been led to expect. The directors and other officers of the Bank might also be to blame— he would not like to say who was really most to blame. He would hardly say that there had been an attempt to make Mr. Mackenzie permanent General Managen for a term, which was not an unusual thing to do. After an interview with the Premier, he was only appointed temporarily. Witness was not prepared to say a word about the ability or competency shown by Mr. Mackenzie since" his appointment. He did not think himself competent to express such an opinion. He was still of opinion that Mr. Watson and Mr. Mackenzie should not be left together in charge of the Bank of New Zealand. Not bebecause he thought them to be. incompetent, for he did not think himself capable of expressing an opinion regarding their banking ability. He objected to their being together on general grounds — they had been together too long, and were likely to be in the one groove. If someone as capable as Mr. Watson were appointed President of the Bank, he would have »no objection to Mr. Mackenzie continuing as General Manager. Whatever the- positions held by Messrs Watson and Mackenzie, he thought theNopinion of the former woula prevail. So long as witness was a director of the Bank of New Zealand, and the Bank had a mass of bad debts, it would not pay dividends, He considered that directors of Banks and companies now-a-days had a serious responsibility upon them. Directors who paid dividends when they were not earned, a power given to the Directors of the Bank of New Zealand by the Act of 1893, were running a serious responsibility. According to his present lights, had he been a Director of the Bank at that time he would not have paid dividends under that provision of the Act. He thought dividends should only be paid out of profits, and his impression was that the dividends paid had not been earned. There were some very good men in the Bank of New Zealand's service, but the directors were not prepared to piok any officer on the staff for the position of General Manager of the Bank. He did not know whether the Bank's staff contained a " strong and capable man " such as was desired by Mr. Booth. At the time the appointment of General Manager was being considered, the directors of the Bank of New Zealand made no selection from among their own" officers, nor were they prepared to make such a selection now. Mr. Seddon — Do you think it would be to the advantage of the Bank of New Zealand to secure an experienced London banker as General Manager, or would you favour one with a varied colonial experience ? Witness gaid he would prefer an officer of large colonial experience ; but his own idea was that two officers should be appointed to act in the position of General Manager, one >\ith a London and the other with a colonial experience ; but that neither of them should hold the title of General Manager, although both should be located at the head office. Witness stated that no Bank of New Zealand officers had been dismissed to make room for Colonial Bank men, but some of the former had been transferred, and their positions filled by ex-Colonial Bank officers. Many of the officers of the Bank of New Zealand no doubt looked upon the absorption of some of the Colonial Bank officers as likely to delay their own promotion, and no doubt some of them thought they should receive appointments given to Colonial Bank officers. There was sure to be some feeling that having a, f President and General Manager from the Colonial Bank officers from that Institution would be favoured before the old Bank of New Zealand officers. The directors, however, had given it to he understood that they would look into the matter and allow nblfiing of this kind. The officers were now working more harmoniously. Taking the total salaries sheet of the two Banks prior to the purchase, and comparing it with the sheet of the Bank of New Zealand now, there was a saving of about £20,000 a year, although the whole of the business of the two institutions was now done by the Bank of New Zealand. He did not think the Government had been .told that it was the intention of the Bank to take £54,000 out of profit and loss this year to meet writings bff. He thought Parliament* should make the payment of the dividend on the preference shares independent of the shareholders of the Bank. The share-list of the Bank was kept as good as possible. The Directors did not throw away good money after bad in pressing for the payment of calls. Unless they were satisfied that a person was capable of paying calls they did not press. The altered system of carrying on the business of the Bank, of course, lost them some business, but the Bank could not continue doing business on the system kept to in the past. It was not correct to say that in AVellington and the Wairarapa the Bank advances were much more liberal than in any other parts of the colony. There was a danger to banks when mining booms were on, and he was sorry to say he was afraid New Zealand would know it by and by. Regarding the appointment held by Mr. T. L. Murray, Manager of the Bank at Auckland, on the AngloContinental Mining Syndicate, he thought it was in the interest of the Bank, and

an exceptional departure. It was an advantage for the directors of the uank resident in Wellington to travel about the colony, making themselves acquainted with the Bank's business and the position of things. It would be useful to have directors from different parts of the colony, but the drawback to this was the jealousy it would cause amongst business people — the more directors appointed the more jealousy it would occasion, ne thought the assistance rendered to the Bank of New Zealand by the Government had been a saving to tho colony generally, and had averted disaster. In his opinion the colony was justified in coming to the rescue. Regarding the trading concerns, he was not yet satisfied that the Bank could continue to carry on these without the directors making themselves responsible to the shareholders. The total writiug-off of the Bank business at Tiji had been £1769. The last audit at Tiji was in March and April of this year. To Mr. Montgomery— Witness was asked by Mr. J. Murray to become a director of the Bank of New Zealand. He was told by Mr. Murray that after the assistance given by the Government the Bank was in smooth , water, and all that he (witness) would be required to do would "be to give a couple of hours a week to the Bank's business.'\ His impression was that the.Bank's position was then satisfactory. Mr. Murray's statement of the* position of the Estates Company was misleading, owing to his sanguine ideas of the properties. He did not think that Mr. Murray could have been fully acquainted ■with the position of the Bank at the time he told witness the position. The zeal and energy displayed by the Bank of New Zealand Inspectors, Messrs. Buller and Litchfield, in connection with the investigation of the Colonial Bank accounts, ■was responsible for their receiving a three years' engagement. Mr. Watson disagreed with the severity with which these gentlemen treated some of the accounts of the Colonial Bank. His view was more favourable to some of the accounts than were those of the Inspectors, and thedirectors preferred to take the views of their Inspectors. The result, so far, had since proved that in most cases the Inspectors were right. He did not think the Colonial Bank could have carried on in the position it was. It might have made a call, but it could not have carried on without the confidence of the public. _ At 1 o'clock the Committee adjourned till 11 o'clock to-morrow morning.