BANK OF NEW ZEALAND

Evening Post, Volume CVI, Issue 82, 17 October 1928, Page 21

BANK OF NEW ZEALAND

PRIMARY PRODUCERS' POSITION Resolutions were carried at the recent Dominion conference of the Farmers' Union in regard to the desirability of the Government interfering with the Bank of New Zealand, with the object of assisting the primary producers. In reply, the Prime Minister (the Eight Hon. J. G. Coates) stated in a • letter read at a meeting of the executive of the Farmers' Union yesterday that in the first instance profits earned by the bank were not really as large as they appeared to be. In addition to the capital proper of the bank there were also invested in the business large reserves built up out of past profits belonging to the shareholders. Thus, the return to the shareholder on his real interest in the bank was little more than the current rate of interest and not more than was earned by trading concerns. The Government's position in relation to the Bank of New Zealand was made the subject of a statement in the House by the Minister of Finance last year. The Government took the stand that they were quite entitled to make representations to the directorate of the banlf on matters of general interest, but that any direct political interference would harm rather than help any particular section of the community. Strong banks, run on purely business lines, formed one of the essentials of prosperity, and accordingly it was the duty of the Government to see that the directors were left free to exercise their powers in accordance with the principles of sound banking. When those principles were followed, profits naturally occurred. The primary producers, as borrowers from the bank, were not really concerned with the profits of the bank, but with the overdraft rate. Tho latter had no relation to profits, as it was fixed according to the volume of deposits received, and the deposit rate was governed by the competition for deposits, without which, of course, ' advances could not be made. The overdraft rate was reduced in July to 6»} per cent. The average rate charged in the years indicated was as follows:—1897, 6.56 per cent.; 1914, 6 per cent.; 1027, C.67 per cent. It would be seen that the variation over a long perio;! of years was very small, and it was clear that the postwar difficulties of the primary" producers were not due to excessive bank rates.