PRODUCE & MARKET REPORTS FROM DAY TO DAY

Evening Post, Volume CVII, Issue 28, 1 August 1929, Page 16

PRODUCE & MARKET REPORTS FROM DAY TO DAY

DOMINION BANKING

NEW ZEALAND EEVTJEW

"A DISTINCT TENDENCY"

"Evening Post," Ist August.

New Zealand banking conditions -occupy a page (less illustrations) of. "The Times .Trade Supplement Banking -Number." The, writer of the article refers to the great increase in deposits with the banks, deals with the position occupied by the Post Office Savings Bank, and in referring to,'the policy of the late Government, remarks: "If the provision of' Government credits were made a main purpose .of a sayings bank, it is easy to see the.pitfalls into which an Administration with ambitious plans of expenditure might fall. There is no likelihood of' such a dangerous departure at present. Sir Joseph" Ward, who controlled the Treasury and the Post .Office* for many years, is, fully seized of the need for keeping the Savings Bank strictly a bank for savings." '. Attention is then drawn to what is described as a distinct tendency on the part of some sections of the community towards interference with the banking •institutions. Mr. Stewart, as Minister of Finance, had to meet this, when he was urged to bring pressure to bear through the Bank of New Zealand (in which the Government has a share) to prevent a rise in ' the bank rate. Mr. Stewart then laid down the principle that the; political authority must not attempt to; dictate bank policy. The Government was warranted iv placing its views before 1 its; own directors, but further it must not goi A further illustration of this same tendency was seen in the early post-war, years, when numerous commercial trading concerns and local bodies accepted deposits and used them without maintaining: sufficient liquid reserves. , .': V THE MORATORIUM. A .When the slump of 1921. led ..'. the' del positors to call for their money it became, necessary to legislate hurriedly;; for a' moratorium of deposits to prevent'a'<& aster. This'extension of deposit''terms did, not. apply to\;the regular'banking 'institutions, and some-of the old-established deposit arid mortgage companies did not ayail themselvts of the protection.' It v,-as necessary mainly for the trading concerns which had. been tempted by the thought of banking profits' to attempt one. branch of bank business without the requisite experience and safeguards.. That lesson has not, been wholly forgotten, but there is always a possibility that the attempt may be repeated with even more serious consequences. ' ;The Dominion is even now experiencing; . though not in excessive measure, the inconvenience arising from the rapid return of; Post Office deposits to ordinary banking channels. Had the sum of over two: millions thus diverted : been made available more gradually it would have been more readily absorbed for trade and development. As it is, it may take longer to. bring it into full use. "LACK OF CONFIDENCE." .Another significant fact, denoting lack o£ confidence in business on the part of the: private investor, is the great proportion of funds held by the banks.on fixed deposit terms. The movement between the two classes of private deposits is:shown, and is described as remarkable. Those who have followed the bank returns from quarter to quarter will be familiar witn them, ' ■ The'writer concludes: "The maximum rate of interest on deposits made or renewed since July, 1928, is 4% per cent. It. -is... evident that investors prefer this moderate return with safety until they : can see how the financial position wiU develop. The keynote of the position is confidence. The banks, by-a policy of with caution, have earned and hold this confidence, and at present mrf V S t \ m?rked. inclination on the part of the investing public to make their investments through tho banks Where . confidence is fully established there is no lack of funds """"snea Wn th te ? eant| me the banks are follow' ing a steady policy from which they refuse to be turned either by criticism of their conservatism or by a' desire to reduce the margin between deposits and advances Some large amounts, which might have been used here had the demand exW m 'V CCeptable t rm ' h«ve found inIm D rrLS VerS f ea: ,bl! 1 there are still ample finds for legitimate enterprise Tie banking policy has been, and is to resist any tendency to use funds -with pTentSil tlO Th'beCar th6Se f«"ds are &%^7t X Sletrfd--2? I'"?' b'lt H ■IpiU ass"re that th e gjgr shifted frt