RESERVE BANK BILL

Greymouth Evening Star, 14 October 1933, Page 7

RESERVE BANK BILL

QUESTION OF GOLD TRANSFER

[PEG PRESS ASSOCIATION.]

WELLINGTON, October 13.

The following statement has been made by Mr. J. T. Grose, chairman of the Associated Banks:— When the Reserve Bank Bill was first mooted, the Prime Minister agreed that the proposed bill should be discussed with the banks who, though some of them were opposed to a Central Bank, had agreed to assist the Government in seeing that the bill was drafted on the best possible lines. As a result of this, small committees were appointed by the Government and the Banks, who went through a preliminary bill in detail, and made recommendations to the Government and though on one or two major points, agreement could not be reached, a bill was drafted. Following that, the heads of all the Banks were invited to meet Cabinet, and the whole matter was again discussed, and a good deal of discussion took place in respect of the true value of gold held by the Banks. The gold is held largely against their note issues, but also substantially as a reserve in the ordinary course of their business, and quite apart from the requirements of their note issues. The banks held that the gold was their property, and that the true value of it, of course, was I theirs also. So it is recognised at law, that all gold and silver paid into a bank becomes the absolute property of the bank, and those who pay it in become depositors, and have a claim against the banks as their debtors. Conversely, the deposit of gold, or other currency by the customer might reduce his overdraft and so reduce the bank’s claim as a creditor against the customer as a debtor. No satisfactory conclusion between the Governments and the banks was then arrived at in respect of this matter. Many meetings between the h'eads or representatives of the banks and the Finance Minister and others followed, and in the end, though the banks did not in any way depart from their claim that the true value of gold held by them belonged to them, it was agreed that a clause should be put into the Bill under which the contention of banks was set out, and it was also set out in the bill that having regard to all the circumstances it might be contended that the Reserve Bank or Government would be equitably entitled to a proportion of such value, and a clause provided that on realisation, the value of any gold coin transferred to the Reserve Bank by any bank shall be credited to that bank, or apportioned between that bank and the Reserve Bank, as may be agreed between the Governor of the Reserve Bank, and the said bank. Failing that, the question was to be determined by others, mutually agreed on by the bank concerned and the Governor of the Reserve Rank, and failing that by a special tribunal, comprising the Chief Justice of New Zealand and two other persons. This clause was arrived at, as stated, after very many consultations and discussions, and incorporated in the bill. The hill was introduced into Parliament last session, but did not get beyond the first reading. The banks now iearn that there have been deliberations bv members of the Coalition Government, and that an amended bill is to be introduced shortly. It has been stated on behalf of the Government that even if any possible changes should prove necessary and desirable in the bill it would remain substantially as first presented so far as gen- ■ eral principles were concerned, and i also that there were to be no major ' changes in the method of the working of the Reserve Bank. This would seem i to dispose of reports that circulated 1 recently, that it was intended to have ! a majority of Government-appointed ’ directors or even that the Govern-

ment should provide capital for the bank, in lieu of subscription by- private shareholders. As stated, the banks hold that their gold, with its true value, is their property, and it is not generally known that a great deal of gold coin, imported into New Zealand by the banks and held by them, has never been in circulation, but has been retained in the banks’ safes, ft may also bo ex plained that a good deal of the gold thus held, has been received in exchange for bullion purchased in Now Zealand, by the hanks. There is another factor that is not generally known. It is that until recent years the settlements of exchanges between Australian and New Zealand, were frequently made in gold.