THE BANK BILL.

Evening Post, Volume LIV, Issue 141, 11 December 1897, Page 2

THE BANK BILL.

Commenting on the Bank Bill now before our Parliament, the Sydney Daily Telegraph says :—": —" The Bill introduced into the New Zealand House of Representatives for remodelling the management of the Bank of New Zealand aims unmistakably in the direction of making that institution a State Bank. The President at present is appointed by the Government, but that office is to be abolished, aud his power of veto is to vest in the Government itself; that is, in the Governor-in-Counoil. At present the New Zealand directors are five in number, two (including the President) being appointed by the Government, and three by the shareholders. Under the new Bill there will be nine direotors, five appointed by the State, four by the shareholders, and one Government director is to be chairman. Then there is to be a standing committee of four directors, two appointed by the State, one of whom is to be chairman. All along the line, therefore, the Government is to be in a majority. With regard to the assistant auditor, the cable does not state by whom he will be appointed, but the present auditor is appointed by the Government. The control of the Bank will therefore vest wholly in the New Zealand Government, and the direct power of veto, which overrides all the directors, will rest in the Government itself. This is as complete as need be, short of the State guaranteeing the deposits directly, and there is really no reason for withholding that guarantee, as it is virtually given now, the deposits ranking in priority to £5,180,265 of capital which the State had put into (.he bank. Henceforward the State is, we consider, absolutely answerable, not only for every penny put into the bank, but for the good conduot of its affairs, and it is the first example of any State Bank in the British Empire, it being much more a State Bank than the Bank of England 6r the Presidency Banks in India. How will the control work? To depositors the security should admittedly be ample. As to the profitable nature of the business generally, that must depend upon the care, skill, and purity of management quite as much uuder State control as under any other form of control. The essential is that there shall be no political bias whatever. Can a New Zealand Government resist temptation in that particular? So long as the Government put the best men at the head of affairs and efface themselves, all will go well. But to really interfere in the business would be entirely injurious, because statesmen, especially statesmen with socialistic tendencies of a pronounced type, are emphatically not bankers. The New Zealand Government aims at levelling up and leveling down men to an average as much as possible. Whereas the only sound, the only possible, motto for the banker is, " Unto everyone that hath shall be given." But there are further pitZjsions in this New Zealand Bill applicable to all Banks. The first is that all Banks shall keep assets in the colony equal to their liabilities (also in the colony, we suppose). How does this affect the Banks :—: —

The National runs the margin very closely, j and the Union has £372,000 more liabilities than assets in the colony, and would, under this Bill, be compelled either to reduce the one side of the account or increase the other by that amount. This is, to say the least of it, a most arbitrary proceeding. If all the colonies introduced similar provisions, it would be almost impossible to conduct intercolonial banking operations. What is more, the provision is grossly unfair. The Bank of New Zealand, as has been pointed out, has the advantage of £5,000,000 of Government backing, and if that £5,000,000 were included amongst the liabilities, those liabilities would be nearly £4,000,000 in excess of the assets in the colony, and this provision in the new Bill would simply paralyse its operations. But that liability is not included. Again, it is necessary that our Banks should keep cash balances and securities in London. This provision in the Bill might, therefore, tend to reduce those cash balances in London to an injurious extent. If one colony introduces a provision of this nature, it is at the expense of neighbouring colonies: if all introduced similar provisions it would cripple banking operations wholesale, because in working, margins of surplus assets would have to be kept in all. There is another provision in this Bill which is also most objectionable. Trading concerns and lands held by Banks must, under the Bill, be disposed of within three years, Had such a provision been in force when the Bank of New Zealand was saddled with its globo assets, what would have been the result ? There are periods of years in which such assets are simply unsalable on any terms; and such provisions must have the effect of greatly restricting advances on land and to trading firms. Will this be to the advantage of New Zealand? Possibly these provisions may be designed to throw such business into the hands of the Government Bank. At any rate, such provisions are not only adverse to banking, but may well have the effect at times of seriously depressing the property market, and of injuring customers as well as bankers.

lankofN.Z. ... Fnion of A ustralia lank of N.5.W.... lank of Australasia rational of N.Z.... Liabilities Assets in N.Z. in N.Z. £7,012,587 £8,190,431 2,505,462 2,133,611 2,405,428 2,693,17 1,200,733 1,829,101 2,117,263 2,226,25