THE BANK INQUIRY.

Evening Star, Issue 10121, 26 September 1896, Page 2 (Supplement)

THE BANK INQUIRY.

The following in a continuation of the Hon. J. G. Ward's evidence before the Legislative Council's Banking Committee : Did Mr George M'Lean, in addition to the other advice which you told us he gave, advise the Government that, instead of the guarantee of £2,000,000, they should assist the Bank of New Zealand by providing for the pressing liabilities, which he estimated to amount to about £500,000 at that time ? I have an indistinct recollection of Mr M'Lean advocating that the bills in transitu between here and England should be provided for, but that would not prevent the stoppage of the Bank of New Zealand. I understood that Mr M'Lean's general action at the time was, if possible, to make the fall of the Bank of New Zealand as easy as possible for the colony, and he believed that the best course was to provide the funds to meet the drafts on London and let the Bank go, and use the Colonial Bank for the purpose of liquidating it. I do not want it to be supposed that Mr M'Lean appeared to be antagonistic ; it appeared to me that, as far as he could, in the grave situation that was then imminent his anxiety was to do the best for the colony. He cordially discussed matters, and helped with his advice as far as he could, but that was his view distinctly: that the Bank of New Zealand should go into liquidation, that the Colonial Bank should take up its good business, and that the other bad business should be dealt with in the usual way. From your knowledge of the position of the different banks at that time would not the closing of the doors of the Bank of New Zealand have led to disaster to the Colonial Bank or other institutions?—My opinion is that it would have brought down more than one bank. When the Government agreed to the guarantee did you consider that you had sufficient grounds for the statement then made to Parliament that no loss would occur to the colony under that guarantee ? —Yes, I did, and every member of the Ministry did, so far as I know—at any rate, no member (and they were all as familiar with the whole position as I was) expressed any opinion to tho oontrary to me, and I believe now that the colony ought not to lose anything whatever by its guarantee to the Bank of New Zealand, if the Bank of New Zealand is properly and prudently managed. You were led to that belief by the information you had got from Mr Murray ? Yes, we were at the business day and night—the principal members of the Ministry and the officers of the Treasury—and as the result of the information we got, aud a general dissection as far as we could, and consideration of the surrounding circumstances of the whole position. It is known to the chief Treasury officers, and the secretary especially, who was the principal man to confer on Treasury matters with myself, that my great worry, aud my great anxiety, and my greatest trouble in the whole business was that I did not have, and could not get, all the information that I would like to have had; and he knows perfectly well that at

that time I wanted a great deal of information that I could not get. You were speaking yesterday about Mr Murray, and of the information given you and the Government at various times by Mr Murray in reference to the National and the Colonial Banks—offers made to them for amalgamation ; and you said that Mr Murray then informed you that it would be the policy of the Bank of New Zealand to force the Colonial Bank into the position of an amalgamation ?—Not the Colonial Bank, but to force a bank. I thought you said the Colonial Bank ? Well, as a matter of fact, he meant either of them. But his view that time, immediately prior to the legislation, was that the Bank of New Zealand should acquire the business of the National Rank. There is no doubt about that. It was the view also that Mr Holmes (the general manager) entertained, aud he stated positively to mo here that they could obtain the business of the National Bank if they had got the extra share capital that the statute of 1893 authorised them to obtain. After the legislation was through, Mr Murray interviewed, I believe, Mr Coates, the chief officer of the National Bank here, but, on the other hand, I thiuk it was after he found that they could not get the business of the National Bank that he said that it was absolutely necessary that the Bank of New Zealand should have the business of another bank, and he desired it should be done by amicable arrangement. He said, failing that, that the alternative would be ruinous competition, and I inferred from his general remarks that either the National or the Colonial Bank would be forced to join them. Was it the proper thing to assist one institution and to force any terms at all upon other institutions of the same kinel in the colony, and a colonial institution particularly?—l must answer that by saying this : Was it a proper position for the Bank of New Zealand to be in, with its enormous ramifications over this country, with the enormous indirect responsibility that the country had in the Bank itself? Was it a proper position to put the country in to allow the Bank, with the direct and indirect consequences that apparently jwould result, to come down ? Because the first consideration was Ib it desirable to let this Bank go ? That was the only consideration so far as the Government are concerned. It is undeniable, in my opinion, and I felt it all along, that the fact of giving aid to the Bank of New Zealand put it in a distinctly superior position to other binks and that it was distinctly unfavorable to any other bank, and especially to the Colonial Bank, which, in reality, was the only bank that might be said to actually belong to the country. If you ask me < my opinion, I 'should have preferred ten thousand times not to have given to the Bank of New Zealand any assistance, but it was a necessity. I believed at the time that it would injure the Colonial Bank, and I have never altered my opinion about it, and never shall. What apparently he wanted to do was to strengthen the Bank of New Zealand, to give it an extra earning power by the acquisition of another bank's business ; but if you ask roe whether the position was

a desirable one I should say that it was not, bub it was the circumstances—&nd circumstances are stronger than men—and there th,ey were. But they did inform you that that was the ultimate intention of the Bankl'of.New Zealand, if they were obliged to take'it ? Praotically that the competition by low rates to enable the Bank of New Zealand to obtain the extra business would be such as to compel them to fight for additional business'by competition and the general cutting of rates. That is to say, it would force them ? -I do nob mean to say, or wish it to be inferred, that he used tho word "force," but that was distinctly the result of what would take place. You said yesterday that the Bill preventing the Bank of New Zealand purchase of the iColonial Bank after the session was brought in by you in consequence of reports. What did you mean ?—When the proposed amalgamation scheme was laid upon the table of the House it was not at all to be wondered at that, in a technical matter of the kind, three men out of five did nob understand it, and that many iucorrect conclusions were arrived at by people hurriedly that oertainly were not iu the minds of those who were endeavoring to bring about the amalgamation, and wrong impressions were conveyed. It is, unfortunately, a failing of humankind that the worst motives are attributed to men in many cases when such motives do not exist; and some people believed at the time that an attempt was being made to bring about amalgamation solely to promote the private interests of individuals. As a matter of fact, no such thing was iu the minds of those concerned at all, so far a3 I know. There was very little time for the consideration of that scheme from the time it was laid upon the table of the House before the end of the session. My own impression waa that twelve months should be given for people to think the whole matter over, and to take proper time to think whether they were going to bring about an amalgamation or anything else. I told my colleagues at the time that I would not go on with the scheme—that I wished to hold'it over. Hon. the Chairman : Mr M'Lean appears to have been of the opinion that the Colonial Bank would have been able to go on if the Bank of New Zealand went into liquidation, as he proposed?— Yes, if the Government business was given to the Colonial Bank.

That was more or less opposed to the view taken by Government—by you, for instance? —Yes. My impression was, in the peculiar and difficult circumstances in which we were placed, that there was no alternative but to let the Bink of New Zealand go down, and I believed that the consequences, ,if we did let it go, would be very serious to the country as a whole. If, then, the Bank of New Zealand had been liquidated, and the Colonial Bank hid fallen—to say nothing of the possibility of any other bank being obliged to close—what would have been the position of the country with regard to the carrying on, having its ordinary banking requirements carried on ? —Well, my opinion is that, if the Bank of

New Zealand had been allowed to go down, and the Stato assistance had not been given to another bank, all the other banks would have come down too, and that the whole of them would have required to be reconstructed. That would have necessitated the locking -up of all deposits, and probably their conversion into long-dated deposits for many years, so far as the Bank of New Zealand was concerned; and my own opinion is thab a reconstruction scheme for the Bank of New Zealand would have been the first scheme that those interested in the Bank of New Zealand would have suggested. My own opinion is that the country would have probably felt it due to the Bank of New Zealand to have had some reconstruction scheme for it, so as to allow it to be carried on. All its bad and doubtful business would have been lopped off, and its shareholders and depositors would have lost enormously. But in th? interval I should say that one of the Australian binks would have required to have carried on the business of the country until the chaos had been swept away. From your knowledge, would they have been able to carry it on, considering tho very large volume of business represented by these two banks ?—I should say that, to have been carried on by any bank under such circumstances as must have supervened, it could only have been done with the greatest difficulty—that a severe strangling for the time of most of the industries of the country must have resulted. If a powerful bank took up the good business as a whole, I should think that it would have been able to have carried it on, but with great restrictions to tho country, and it could not have been carried on as it has been by the Bank of New Zealand. It would have caused an unsatisfactory state of affairs to colonists generally, and even for the business of the Government, and generally would have caused much distress and loss to the people as a whole. ( To be, continued.)