SAFE BANKING

Evening Post, Volume CVI, Issue 46, 31 August 1928, Page 8

SAFE BANKING

" In the past ten years the banks operating in New Zealand have been the target for much criticism. Some of this is only the price paid for success. Any institution or individual conducting a successful business in these days must expect to be charged with exploit- j ation and similar offences. Even those people who benefit by enterprise are apt to forget that benefit and be jealous of tho rewards won by industry. The unpopularity attendant on success has, however, been increased becauso the banks, in pursuance of a safe policy, havo been obliged to keep a careful rein upon their customers. They havo found it necessary to give a lead in the deflation process, to enforce tho termination of unsound ventures, and to j put a check upon importation. New Zealand is to be congratulated that, in times of difficulty, the banking busi- I ness has been in the hands of men courageous enough to impose this financial discipline. Later this may bo recognised. For tho present there a^e many who still smart from the correction. Somo of theso possibly hope that the establishment of a new bank will effect radical changes in the policy of the existing banks of issue, We '■' doubt very much if it will. There may be a slight redistribution of business, but no bank can woll afford to break away from the general principles which have guided banking policy in New Zealand. ' ' Those principles are not laid down by the associated banks; they are only applied to practice. The principles have been established by long experience, and they are in part embodied in legislation and in part maintained by custom. The statutory part is imposed by the. legislation under which !tho proposed new bank will obtain its chartor, and the customary part will, wo bolievo, be accepted by the good sonso of the directors. We have not to go far back to isee the necessity of theso customary restrictions, Following the War many institutions outside the bank circle thought; to reap a rich harvest by accepting deposits. They realised | later, to thieir own undoing, and at considerable cost to the country as a whole, that tlie conservatism of the banks in this branch of their business was not dictated mainly by a desire to amass profits. In tho future, as in the past, banking policy must follow the line of safety, especially if the Minister of Finance is correct in his anticipation that the business will not be ag popular in the near future as it has been. Moreover, it will be dangerous, not merely untimely, to attempt; such experiments as that suggested by tho Leader of the Opposition to hinder the free, flow of money to investment markets outside the country. Such restrictions can give only temporary and illusory advantage to the New Zealand bprrgwer. Ultir inately, especially in a country still drawjng heavily on outside capital, they must cause great hardship.