DANGER SEEN

Evening Post, Volume CXXV, Issue 146, 23 June 1938, Page 9

DANGER SEEN

REPORTED LEGISLATION BANKING IN AUSTRALIA SYDNEY, June 22, Addressing the Institute of Accountants today, Sir Alfred Davidson, general manager of the Bank of New South Wales, directed attention to the proposed Federal legislation which requires trading banks to keep a percentage of their total deposit liabilities as a cash deposit with the Common- | wealth Bank. He emphasised that this was bound to lead to a drastic reduction in advances, resulting in a decline of business activity, incomes, and employment. . He indicated that the required deposit would be in the vicinity of 10 per cent, of the banks' total cash balances. Consequently, in order to protect their depositors, trading banks would be faced with the necessity of finding additional cash in order to meet the compulsory minimum deposit requirements. Existing liquid items could not provide the additional cash. Thus the only way was to reduce advances, which would probably lead to a serious depression. Sir Alfred added that the proposed legislation would disturb the development of the Australian banking system from the lines of the well-tried and flexible English system, and produce a revolutionary change which would bring in undesirable rigidities which had proved so unsatisfactory in other countries.

No official intimation has yet been made concerning the legislation referred to by Sjr Alfred Davidson.