STATE SAVINGS BANK

Evening Post, Volume CXI, Issue 100, 30 April 1931, Page 11

STATE SAVINGS BANK

NEW SOUTH WALES SHOCKED

SENSATIONAL SCENES

! '(From "The Post's" Representative.) SYDNEY, 23rd April. Something closely approaching a financial panic of the most dangerous type developed in Sydney on Wednesday following the announcement in the morning papers that the Premier (Mr. J. T. Lang), acting for the Commissioners, had asked the Commonwealth Bank to take over the affairs of the Government Savings Bank of New South Wales. Although many-ugly rumours had been in circulation for some weeks, this was tho first official suggestion that all was not well with a vast institution so closely concerned with the affairs of the people. It was not surprising, therefore, that a sensational run on the bank should develop, and that thousands of pounds should be withdrawn, making it imperative that the bank should close its doors until the merger negotiations have been completed. It is certain that had the bank remained open it would not have been able to meet the demands upon it, and, in addition, it would have seriously embarrassed other financial institutions whose position to-day is by no means sure. The decision to closa tho bank is generally applauded, even though it will create hardship in a. large number of individual eases. NO NEED TO TEAR. It has been announced authoritatively, though not officially, that depositors with the Government Savings Bank need entertain not the least doubt as to the security of their money. Nevertheless, the fact that' behind the bank stands the credit of the whole of the State has failed to impress scores of people, who seemed to have overlooked the announcement by the Prime Minister (Mr. Scullin) that the' Commonwealth will stand behind all the Savings Banks in Australia. The last balance-sheet of the New South Wales Savings Bank was dated 30th July, 1930, and deposits in the savings department were then shown to- be ■ £ 70,----633,344. Operations since then have reduced the- amount considerably. Assets, on .the other hand, were valued at £72.870,781, which meant a, surplus of £1,658,465, of which £1,500,000 was shown in a reserve, and cash was shown as £1,751,584; fixed deposits with tho Treasury amounted to £.5,582,----501. Inscribed deposit stock of the bank's rural-department accounted for £4,423,322. and advances for homes totalled £10,819,779. In the circumstances it was unfortunate that accompanying the persistent'withdrawal movement there was an increasing "frigidity" in the bulk of the securities held by the bank as cover for part of its liabilities. GOVEENMENT STOCKS. The Commissioners have had invested in New South Wales Government stocks a total of £30,832,007. In normal times it would have been possible, without detriment to the institution, to have sold a portion of that stock to meet obligations. Political factors, however, have intruded—Mr. Lang's repudiation scheme was not the least of these—and it became impossible to liquidate the*assets freely without undesirable, results. The importance of •the political factor in this new crisis is emphasised by the knowledge that heavy withdrawals began in October last,"before the last State elections, when it was freely asserted by Labour opponents that Mr. Lang would interfere with the. bank and the bank's funds. The fact that there -was no justification for these statements did not matter and the Commissioners have gone to great expense ever since to explain to the people that they were beyond the control ,of the politicians. This propaganda lost a great deal of its influence when rumours were circulated to the effect that Mr. Lang intended to transform the bank into a State Bank proper. Then there were statements, apparently well founded, that there had been delay in the payment of interest on the bank's holding of State ' Government'securities. The recent legislation of tho State Government, aiming at a reduction of interest, was n. third link in tho chain of cirenmstancßS culminating in the present position. Though not directedagainst the bank in particular, this legislation produced an unfavourable effect on the bank's depositors, and the run of heavy withdrawals persisted. The net result has been a weakening of the bank's reserves, even though the bank remains in a solvent position. WITHDRAWING SAVINGS. When the doors of the bank were opened at 10 a.m. on Wednesday more than 100 people were waiting at the door. In less than an hour 2000 depositors had withdrwan their savings. All through the day people of every class, rich and poor, poured through the bank's doors and -withdrew all they h.id in the bank. There was no excitement, but an undisguised anxiety to collect while they could. On all hands tliei'fl was n condemnation of Mr. Lang and his policies. Mr. Lang waa blamed for everything. At all the suburban branches the position was tho same. Scores of people, after collecting their money from the State Bank, proceeded 'to the Commonwealth Bank opposite and opened new accounts there. So great was the rush on the Commonwealth Bank that many extra tellers had to be employed. So it is that the process of the movement of credits has comprised, largely, a transfer of accounts from the State to the Commonwealth, institution.

There was great excitement in the Federal Parliament when news filtered through that the State Bank was in difficulties, and Mr. Seullin had _to appeal to members not to do anything that might create a panic. "If we become panicky," he said, "what must we expect of the people outside?" He then made a statement which was by no means reassuring. He said: "All the banks are suffering disability. Jt niny be that the- Commonwealth Bank will be called upon to go to the aid. of some of the other institutions in this country, and I can say that nil the resources of the Commonwealth Bank and of the Commonwealth Government will get behind them. I would remind members in saying this that they also have their responsibilities. There is only one bank that has reserved power1 in time of stress, and that is the power of issue by the Commonwealth Bank, but thatissue is limited. This House may I be called upon to give it greater power, and you may again see the Fiduciary Bill earlier in the Parliament than you anticipated. We will emerge from this crisis, and none of the people will suffer any losses. We will have to play our .part." COMMONWEALTH TO RESCUE. Although no official announcement, will be made untiL the full details of the proposed merger are known, it is definitely established that the Commonwealth Government will bo prepared to permit the Commonwealth Bank to fibsorb the New South Wales Savings Bank. Mr. Lang has always bitterly attacked the Commonwealth ' Bank j

Board, and now the people have the amazing spectacle of watching him go cap in hand, on bended knee almost, to that same hoard. What a stinging blow to his dignity!