BANKING REFORM.

Evening Post, Volume LXXVII, Issue 108, 8 May 1909, Page 2

BANKING REFORM.

TO THI3 EDITOR. Sir, — During the x'a?t few months a considerable number of lctteis have appeared in your paper under tho above heading. The question of banking reform is one of very great moment to the Dominion, bearing, as it does, on our expansion and on our prestige. Throughout the jears the banks established here have been in business there has been no question as to their stability, if we except the period before tho reconstruction of the Bank of jN'ow Zealand. Because of this the utmost care should be exercised, so that any inncnation in the shape of new banks and uew men should not undermine that stability by the inauguration of a period of unhealthy competition. Sir Joseph Ward is of opinion that the country is "underbanked.'' If this means that all that is required of banks is the unrestricted outpouring of funds, then it must be accepted that the keen discrimination of the men in charge of our banks is to bo set aside without consideration as to whether they act wisely in withholding moneys at particular periods. Sir Joseph declares that it was an easy money market, in past days, which, bringing about unwanted speculation, has had its reaction in financial restriction. Now, what would the condition of things be were, say, two additional banks established representing capital perhaps of £2,000,000? Branches would be opened throughout the country, and competition of the keenest would be the order of the day. Imperativeness would mean usolessness, and wo could not expect them to be patriotio enough to do business without endeavouring to mako profits. A consequence would be that the old banks in possession of doubtful securities would feint at foreclosure to get rid of theirs by ready transfer to the new banks, and ultimately these would find themselves with depleted coffers, ana, on tho other hand, with security cases full of unshiitable contents. I trust I am not pessimistic. But tho fact is that, as already referred to in one of my former letters, tho taking in of securities with one hand and advancing money with .tho other is not banking. It is pure and simple pawnbroking. The legitimate functions of banking are discounting and exchanges and the making of such advances as are promptly recoverable. Dead loans on mortgage can only mean trammellinga bank's legitimate operations and the harassing of the trading public. And who, again, is to be the judge of public financial requirements? It seems to me that tho man who wants to borrow is less likely to consider the pros and cons in tho same anxious way as tho man who desires repayment of his money on demand. And this is where tho banker stands. A question of very great import is whether it is want of capital that accounts for the calling in of bank advances, or whether it is owing to wiso forecasting of the men in charge of our banking concerns. I think it may be safely concluded that tho latter is the true pronouncement. For surely credit must bo given to the men referred to for tho possession of at least an ordinary amount of sense, and we may rest assured that if the legitimate expansion of the Dominion called for or warranted the broadcasting of financial accommodation, capital correlative with the requirements would be forthcoming. But lot us remember that in the lavish advancing of money at the present time the very evil deprecated by Sir Joseph Ward would bo again in evidence. I refer to frenzied speculation. The hoped-for prosperity cannot, I feel sure, come from an unwarranted ontflow of capital. Self-denial publicly and privately is tho corrective, and, as it is impossible to have prosperity without a break, so neither, on the other hand, need a long period of adversity bo anticipated. — I am, etc., 4th May. GRATIS.