N.Z. RESERVE BANK

Grey River Argus, 13 December 1932, Page 6

N.Z. RESERVE BANK

PROPOSED POWERS Outline of Bill LONDON PRESS COMMENT. (Au.-. N.Z viable Assn). LONDON, December It . Th - ‘‘Financial ’rimes” says: ‘‘[n >pite of minor modifications, as Hie .('suit of Britain’s suspension cf the gold standard and the attendance of ihe Dominion Finance Minister, at Ottawa, the New Zealand Reserve Bank Bill follows closely Sir Otto Niemeyer’s recommendations. The objections from the viewpoint of the existing banks, appear to be countered in < he* fact that their note-issuing privilege is not a profitable one owing to ? he special taxation. Secondly, it is inimat< rial whether liquid reserves kept, as now. by the banks, or are. deposited with the Reserve Bank. The new institution will be in no stusc a competitor with the trading bank**.” It adds: ‘‘Wheth'r the Bill will have a smooth passage is op n to (Per Press Association). WELLINGTON. December .12 Under the Reserve Bank of New Zealand Bill, of 52 clauses it is provided that the gen-ra! conduct of the Bank's business sh.all be entru-ted to a board of directors consisting of rhe Governor and < to have banking uxperiene-). aid five oth'r members. The Bank is to iinve the exclusive right, for at least iweniyfive years, to issue bank notes in Now Zetland. On the dale proclaimed the lb's' rvc Bank to have this light, every other bank shall trnnsfer 1c llq. Ii -serve Bank, in xchiingc f->r < h ■ equivalent value o. IL'se'* e L’an.k notes, all gold coin (>: bulii- :i then owned by it. The equivi'oi.t value of gold coin in hank not'/ shal 1 !■ • the nominal value of , u ;olt' bullien in bank notes shall lie the comput -d ni Ihe price of £3 17s lO‘.d an i.mice. Any profits de "red by ' be li’escrve Bank from th,, sal • <-f g* '*l ami bullion, transferred to it by any bank, shal' eith''r lie cc -dit.i'' l to fh.';t lia.' I;, i.r be apportioned •ielw- - , n l'i:j’. bank and th - reserve fund oif th'* bank, in a matin’r to ha agreed upon. <■< Io he li.vd by arbitration. Two veais all'* ’ ihe d le v h>‘ti the right of issnii g i i«:es borani*’ v 'tr-<| in tin* Itese'W .'mi!;, other banks shall pay uve - '< th" Resei v * Bank an amount equal o thy vain: of its (hen outstand‘ng not*.- i -sue I < .- payable in New Z"»’a:’ I. •inj its ’in. bilily in respect, of such not.es to holders. shall be deemed 1 o have Inq'ii a.--sumed by the Ih'serv ‘ Bank The genera! condiuq of the Bank’s business wili lq» en'i’H’et to n Board oj Directors, consisting o; a Governor, Deput}' (ioverno. and (We olher nr'in-bi-rs. Th * 1 wo first-nn < n( d shall b? poss' ssed of actuit.' banking cxj.e' j cnee, and will be • au’.f'd to devote of their time exch.siw iy f* the duties of the respective oHic*s The tirsj < : 'ivornor an I D< piny Gov ei nor shall b n appoint’d by the Governiir nt for a term ( >f s<'><"i years Oif the live other in •mliers of the Board, two at. least, shall be persons who have been actively engaged in primary industry and two at least, persons who have b; on actively engaged in industrial or cj'ium'Vcial pursuits. Not more rhan one member al any tim e shall he dir. -ctor of any otlcr bank. On< nimnb ! *r will retire. on June 30th e?.'h yea ', the nr.-t retirement taking place in 1934. The order of retirement shall I o d ? t-rmiu od by ballot. Apart from that, ordinary members shall in- < looted for a period of live years by shareholders at a general meeting. The original capital of the Bank shall be £500,000 in shares of £5 each which shall be offered by the Minister of Einance at par ifor puhlie subscription in New Zealand. Sul)j<*<*t. to the approval of the Miiiiste'*, < h*o capital of the Bank may hc« inscribed in pursuance of a r-solution passed by shareholders. The Minister of Finance shall pay into the general reserve fund of the Bank a sum of x 1.000.000. which shall not b<? recovered -xcept in the event of th n winding up of the Bank. It shall be the primary bity of the Bank to exercise control within the limits of the powers conferred on it by th P Bill, over monetary circulation and credit in New Zealand, that the value of the Bank notes issued by it shall remain stable. The Bank may make and issue bank notes in accordance with the provisions of the Bill, and may buy and sell gold and silver coin or bullion, may accept money on deposit or on current account and may discount or rediscount, buy and sell hills of exchange, promissory note* and other documents arising out of bona fide commercial transactions, hearing two or more g f l >d signatures and maturing within. 120 days after the date of their acquisition by the Bank, also arising cut oi Fiona fide, transactions in relation to the production and marketing of prim a’y products (in the Bill referred to as agricultural Bills), bearing two or more good signatures and maturing within six months after Ihe date of their acquisition by the Bank, provided that the total value of the agricultural bil’s held by the Bank at any one time shall not exceed 40 per cent., of the total value of all internal bills promissory notes and other simi’ar documents held by the Bank. The Bank may discount, re discount, buy and sell Treasury Bills of any Government or bills issued by any local authority or public body in the United Kingdom, or in New Zealand, or other part of the British Dominions, and in ever case maturing within three months after the dat e of their acquisition by the Bank. The Bank may g-ant advances for fixed periods, not exceeding three months, against (1) gold coin or bul-

lion or documents relating to ship meat thereof; (2) securities issued liv the New Zea and Government, or by any local authority or public body in New Z'aland, or such other marketaid' securities having ready sale in New Zealand, as may from time to time be approved for the purpose by rhe Board; (3) any such bills of exchange. promissory note or other documenis as are ref rred to in paragraphs <l. <• and f in this subsection (4) one name promissory notes of any bank carrying on business of banking in New Zealand, with maturity not exceeding 15 days, and covered by any collateral security which the ReserveBank is empowered to discount or to accept us security for loan or advance. The Bank may buy and so I N'-w Zealand (io\ f rumeiq securities or securities of the Government, of the United Kingdom, but so that ihe amount of securities so In Id having more, limn six months currency after their acquisition by tlio Reserve Bank, shall not at an\’ time within a period of four years. immediately succeeding date on which the Bank has become entitled to commence business, exceed an amount equal to twice the paid up capital of the. Bank, and it s reserves. and shall not at any time th- real lcr, ( xce d the paid i,p capital of the I'.unk and its reserves. (i) The Bank may. buy and sell currencies of any count!}-. H may mid'rtii ke the issue and management of N< w Zealand Government loans, and tb.e loans of any local authority or public body in New Zealand, but it sin'll hoi be lawful for the Reserve Bank to underwrite any such loan. It may organise <i clearing system, and may act a s correspondent for any bank carrying on business outside New Zealand, or act as agent of any reserve bank or central bank. <>r other bank or institution fii'tilling the functions of a Res-Tve Bunk. ’The Bank may do any othiq- banking business incident a I io or eonseqii' ii tial upon the provisions of this Bill, and not prohibited by it It shall at all times make public the minimum rate at which it i s prepared to rediscount bills. Th > Bank shall not issue notes of denomination L ss th in ten shillings; shall not engage in trade or othe-wise have direct interest in any commercial, imills: r'.al < r similar unde taking; and >hall not purchase, its own shares or sh-ar-s of any other li.ink. ''xcepl the shares of the Bank of International Het! '< 'in nt s. or grant loans or ,-erurilv of aii}- shares ilia, the Bank is prohibited from pit chasing. l! sh.all mH purchase or mak« adv.-in i-es on s (-(-iirily of r' al property, <-\cept so far us may be required to (*nab e i In- Bank to conduct its business, provided that in ev-nt of any claims of the Bank |>‘ing in the opinion of the Board endangered. Ihe Bank may secure itself' on any ? eal property of the '1- btor. and may acquire such property, which shall, however, h** resold ;t s soon as practicable thereafter; (*i ) the Bank shall not pay interest on any money deposited with, it by any other bank, or pay interest on any .other monies placed on deposit, or on current account with the Bank, provided the Bank may pay interest fo the New Zealand. Government on Government funds h -ld by the Bank outside New Zealand at a rale lower bv not less than une hn’f per cent, than ihe average rat ( > earned bv the Bank, on nil shorl-ltrm funds held |>y it outside New Zealand. The Bank shall not draw or accept bills payable ctl'."rwisp than on demand; (1) the Bank shall not grant accommodation either directly or indirectly to th" Treasury, to any incorporated department of the State or to any local authority or public body by way of discounts loans, advances,* avordrafts, or otherwise, in excess of onethird o-'f the re.venu • estimated. revenue for the year, in the case of the Treasury, or one-fourth of their respective revenue or estimated revenue for the year in case of any State Depart merit, loe.i. authority or public body, provided Hint nothing in this paragraph shall bo construed to confer on the Treasury, any Department of State, local authoiity or public body, power to borrow moneys by way oif Bank overdraft, or to e'xtend any existing power. The Reserve Bank will be required to maintain a minimum reserve of not loss than 30 per cent, of the aggregate account of iis notes in circulation, and then demand liabilities. However, provisions for the maintenance of th ll reserve may be temporarily suspended by the Minister of Finance. In such circumstances, the bank will be liabl c to pay to th* Consolidated Fund a graduated tax. The New Zealand Government accounts are to b e kept with the Reserve Bank. If shall bo the duty nf the Government to entrust to the Bank all its money remittance exchang; aud banking trasactions. No charge shall be made by th P Bank for its services in that connection. A’iter providing for bad and doubtful debts, depreciation, suporannuat ion. etc., and after paying out oif the net profits a cumulative dividend of five and a-half per cc«nt. the surplus shall bp applied as follows: If the general reserve fund is less than the paid-in capital one-half shad go to that ihind. and the residue to tlie Consolidated Fund, if the general reserve fund is not less than the paid-up capital, but is loss than twic* the paid-up capital, one-tenth of the surplus shall go to that fund, and th n residue to th e Consolidated Fund. If the general reserve fund is not less than twic* thp paidup capital, the whole- of the surplus on the year’s operations shall go into the Consolidated Fund. A:1 other banks shal] bo required at all times to maintain balances in the Reserve Bank. The balance shall be not less than the aggregate oif seven per cent, of the banks’ liabilities in New Zealand, other than bank notc«, and three per cent, of its time-liabili-ties in New Zealand.