WORKING TOGETHER

Evening Post, Volume CXXVI, Issue 6, 7 July 1938, Page 12

WORKING TOGETHER

\ BANKS^AND INDUSTRY

«• THE PERiSONAL EQUATION

» ; "Evening. Post," July 7. ]* !, Special reference was made by Mr. ltK. M. Niall, chairman of Goldsbrough iMort and Co., Melbourne, to the part T played by the banks in industry. In ~. his address to shareholders last week ,:Mr, NialLsaict the.banks, were likely ;'- to have fairly 'heavy demands made r^pon them. H6 hoped, therefore* that •. no inroads were made on their re- ', serves at this juncture by any com■pulsory transfers to the Commpnl wealth Bank, sueh\as> were recom- - mended by the Royal Commission. " • "Primary producers and industrial- " ists alike," Mr. Niaii said, "largely defended upon the trading banks for -their individual wants, and they knew '" that the trading banks could tide them " over the lean periods which occur -"through the incidence of unfavourable V. export prices or poor seasons. It ', would be a most unfortunate happen- ■■' ing if such confidence was in any way ,\ disturbed." J "Handmaid to industry" was the appellation applied by Mr. James Mur--*".r"ay, acting; chairman'-of the. Associated Banks.of South Australia.. The banks of Australia, he said "in a recent public statement, faithfully served the interests of industry ' with those other influences that'tended to set going arid- keep, irimotion the .-wheels of industry in general. CAPITAL FOR INDUSTRY. \ Apart from dts ordinary; services to i the community v the,bank,'Mr. Murray, isaid, found the floating capital needed to.manufacture goods and bring them to the consumer. ' ■ The more1 its services contributed ,to accelerate tbe circulation of goods, the *i greater their utility, and for that reason the bank was of necessity restricted: to finance short loans,- loans that went "out and returned with the maximum of "expedition. * , ■ ' The rale of interest charged by the - banks wafcs cut so fine that they, could not afford to share'in the risks of tne * trader. '• Based on the costs of obtaining funds ,by way 'of deposits from the, public, : and- loaded■ with administrative and -operative,'costs and fates and taxes-T----all factors" nowadays outside the control of* a trading bank—the margin of ' profit for bank shareholders was cut ' to "he bone. '\ A FACTOR IN CREDIT. ' Mr. Marray,-, who is'-manager.vof'the : Union Bank of Australia in Adelaide, made a strong point of the personal 'aspect of credit. The trading bank "did\ not and coMd not give credit to - industry, but on the personal credit of "fee-industrialist. ~ , i. "li cannot," he said, "deal with impersonal quantities, but only with personal equations. "- "Tlie business of banking is essentially personal/ . Z The.lending capacity of, a bank was ;*jstrictljr limited to its resources, which '-were ascertainable and could not be .^stretched or inflated. There were tlimes when a bank's capacity to lend "-was limited and restrictions, at times, V«nforced. These were causes arising ,Cnot out ■of doubt about the prospective borrower but out of general ecov'nomie, conditions over which no individual section of the community had —any control or could be held respon- '>' sible for. ,~ Actually, a trading bank was. not a in the generally-accepted iCsense of the term. The bank does not ,"3end*nfohey,-f3iit places at;the disposal: •■of the customer a credit of currency as a "limit") which .the' cus-; 7Jtorner m^y avnail himself of from day day asi the exigencies of his busi*ness required; and the customer pays interest, Tint on the amount of credit, *^but on thedaily balances availed of. j^FLOATING AND FIXED CAPITAL. '.£ Savings banks and life insurance lent vast sums by way of ■ISxed capital against fixed assets, but :"they do not .^finance the industrialist * and trader to place goods immediately Into' circulation. They "are not con-; -stituted for thasfc purpose, have not the < specialised department and specialised staff, nor the experience necessary -to enable them to do so. The function of the trading bank, Mr. Murray, was to furnish floating capital to industry to enable goods produced or. manufactured, as Tihe case might be, arid put on the -market so that the amenities of life Imay be supplied. * of experience had made -the banking system what it was. ~ Mr. "Murray remarked in conclusion: -^The ; trading: bank system "functions -smoothlyJ and efficiently to the satisfaction p£ : ; the,- trader and manufacturer, .carping criticism of an irresponsible' sectipn-of "the community not- , .. "It is; a .human, machine -and ,so is liable to erroxi .but.?it is J9unded r. an: such> > fundamental; p^in•ciples. that,- however, much the name ■may be changed or the control 'be the preservation of these priri--ciples is vitel to' the* mairiteiiahce of -a well-ordered State, of . free ; diehio.cratic citizens, such as we now enjoy-"