RESERVES OCT OF PROFITS

Hawera Star, Volume LIV, 14 June 1935, Page 12

RESERVES OCT OF PROFITS

MONEY SAID TO “LIE IDLE.” REPLY" TO ADVERSE CRITICISM. (Special to “Hawera Star.”) WELLINGTON, To-day. “Assertions have been made in speeches, and in, correspondence to the Press, that there is much idle money in the trading banks, and some per--1 sons have gone .so far as to say that ' money deposited in banks was equivalent to its abstraction from general use,” stated Mr William Watson, chairman of directors, at the Rank of New Zealand annual meeting to-day. j “The expression, of such ideas is, of course, quite an erroneous one and apt to be misleading,” he said. “Taking ,our own balance-sheet it will bo seen 'that the whole funds of the bank, including deposits i are put to use, excepting the proportion of dejxisits we are bound by law to place in the Reserve Bank, and the money we have to 'hold in hand against the exigencies of jour business. Were it not so, it would be difficult indeed to pay the salaries land other expenses of the bank, let alone any dividend to the proprietors. (The principle of banking, like that of , any other trade, is plain service to the j public, and, in the case of deposits, to receive them at interest and for safe keeping. “Banks as well as ordinary traders have been criticised in this Dominion for accumulating reserves out of profits, the deductions apparently being that beyond a narrow margin between rates on deposits and advances, no profit should b > made on the bank’s own funds, that we should not fully employ our resources, or that we should pay all profits away,” the speaker continued. “Had such imprudent practices been universally adopted prior to the recent depression. not only would many trading establishments have been unable to continue paying their employees when trade was unprofitable, as happened in the early nineties of last century. but banks would have been unable to carry their customers through, or to face the losses which wore unavoidable New Zealand was fortunate in having strong hanks which were able to cany on their customers and also extend considerable temporary assistance to the Government.

“Our joint stock banking system is founded upon that of Great Britain, considered by Lord Snowdon the best in the world, but there are people who: think it antiquated and if they could get their way would dissipate the reserves; however, they are not men with a practical knowledge of bunking. Not long ago a visitor to this Dominion was reported by the Press to have .stated that our banking system was behind the age and would not be tolerated in his country; a little later on banks in his country failed by tlio thousand, .while none failed in British lands. ■ Shareholders, and also the Dominion, are to be congratulated on the strength of this institution, which strength is due to the accumulation during many yeans of its v arious reserves, and has enabled it to perform an important part in the development of both land and industries. “In tliis connection, we have to thank Mr Leslie Lefeaux, Governor of the Reserve Bank of New Zealand, for his acknowledgement at that bank’s annua! meeting, of the services which the trading banks render to the country. This is in pleasing contrast to the adverse propaganda of those wire cannot bo considered so well informed.”