SOUND BANKING

Evening Post, Volume CXIV, Issue 19, 22 July 1932, Page 5

SOUND BANKING

yALUE TO COMMUNITY)

A REPLY TO CRITICS

NEED FOR STRONG

RESERVES

The widespread tendency towardsw intelligent and ill-considered abuse of the banks was referred to by. the chair* man of the Associated Banks'; Mr. J. T. Grose, in the course of bis address to members of th, Wadestowu Men's Literary and Debating Society last night. Mr. Grose' stressed the value . to the nation of a strong banking policy, and maintained that the banks of New Zealand are performing their proper function in the interests of the . community /as much' as in their own interests. \ . "We hear that the . banks art economically unproductive, reaping where they have not sown, and taking up what they laid' not down," «aid Mr. Grose. '< We hear that the, banks »r« responsible for . most of. the economic' ills which beset us; that their one and only aim is to suck the life blood of the country.in order to pay fat diviv dends. Nothing could be further iron the truth; the aim is to pay'dividends at the fairest rate attainable, and that this rate is not exorbitant will; be readily appreciated when it is explained that dividends are earned not only on the paid-up capital but on that pins reserves and that the. banks should prudently accumulate reserves in good times as a safeguard against future adverse , conditions, instead of paying them away extravagantly without heed to the future is commendable and not blameworthy.' ' . • .< SOUND BEUSBVSS. ' "Much senseless criticism and abuse would remain unspoken were it more generally realised how closely the prosperity of the country in which the banks trade is supported by, and.de* pends on, the soundness and stability of the banking organisation. To cay/ therefore, ihat the banks aim to /build up sound reserves and to preserve their organisation from any hint or suspicion ( of weakness, is to gay.that the banks tee performing their proper function in the interests of the Dominion as much as in their own interests. What would our standing as a nation be if the banks were to adopt'the weakkneed attitude of shaping their policy according to the wishes of the more uninformed sections: of public opinionf I am firmly convinced that a countrypossessing ft' weak, and impoverished banking system is a country well da the road to national 'impoverishment and possibly bankruptcy." THE COTOTKY'S *BAL. , In times of prosperity, said Mr. Grose, as well as in times of "adversity, like the present, the part that-, must be played by the banks- was to preserve as far as possible the welfare of the Dominion by strictly adhering to sound banking methods,. and also, to conserve the strength and stability of the whole banking organisation by^carefully watching and safeguarding the interests of the whole community, so far as it was their proper function to do so, without allying themselves to any ( sectional or political interests. Tho belief held in many quarters that- the banks were unproductive economically, was the outcome of the unsound theory that the only economic activities which could: claim to be productive were, those directly yielding material '• *joods. Essential services, such as > transport, were sometimes stated to bo niiproduetive even though wlthjout them tha primary produce of the country could not possibly be' maintained. Ifc was entirely wrong to assertthat the banks were economically unproductive, rstf<l l it followed that thoughtless criticism founded on such, an assumption was worthless. ■ , , ■' "■'■' ••■■* " ~ Jcr . , VAX.TIE TO* YAUUti. \ Insistent complaints and grumblings concerning the existing banks and banking system certainly fostered » general feeling of discontent, said Mr.. Gf'ose; hence the rise, of numerous plans'land schemes which were claimed to be the solution of, all our diffleulties. of these oestrums and " ho remarked, ."seem to me to be founded on the .assumption that something can be got for nothing, and those seheines, with arguments 'neat, convincing, and . wrong,' show just how this «an be done. ' I earnestly recommend that «ny system or scheme which ignores the' sound - principle of value for value should be ' carefully avoided. Such can v only lead to greater tribulation. We may be able to defer the day, of reckoning by, side-stepping our difficulties and problems, but the only way to master them is to stand up to them with fortituds and determination. , *'''\. : .'^,^,

"In these days of unprecedented difficulty it is more than eyeijiiscfigjaary to be careful in our expenditure, but economy should be practiced with (thooghtfulneM and good care. A wis» use of money and credit to assist; and encourage worthwhile work and bnsineta enterprise, both primary* /and secondary, is to be commended, and ttt£ banks are encouraging and snpporti*g industry of ill kinds as far as the? properly may do so." ; -