THE RESERVE BANK

Hawke's Bay Tribune, Volume XXIII, Issue 275, 3 November 1933, Page 6

THE RESERVE BANK

BILL PASSED BY HOUSE AMENDMENT TO TWO CLAUSES SHARES RESTRICTED TO N.Z. The Reserve Bank of New Zealand Bill was passed through the committee stage hy the House of Representatives early this morning •nd the third reading was finally agreed to at 3.10 a.m. by 37 votes to 21, and the bill passed. Two amendments were effected in the committee stage, one providing that shares in the bank should be restrieted to British subjects ordinarily resident in New Zealand and the other that appointments of the governor and deputy-governor of the bank should be made by the Governor-General-in-Council on the recommendation of the board of directors. Both were made on the motion of the Minister of Finance, Numerous Opposition amendments were defeated. By Telegraph—Press Association WELLINGTON, Nov. 2.

Urgency was accorded the passage of the Reserve Bank of New Zealand Bill in the House of Representatives today. Speaking on the clause restricting the bank from purchasing shares of banks other than the Bank of International Settlements, the Leader of the Opposition (Mr. M. J. Savage) said the Labour Party felt that New Zealand should base her monetary system on internal conditions; she should not be tied to any monetary system overseas He suggested that New Zealand should put her own banking house in order before connecting herself with international conditions. He moved an amendment with the object of debarring the Reserve Bank from purchasirg shares in the Bank of International Settlements. The Prime Minister (the Rt. Hon. G. W. Forbes) said that the Bank of International Settlements had been set up to enable effect to be given to the financial arrangements of the League of Nations. This bank’s purpose was to provide finance in instances where the League of Nations was satisfied that financial assistance should be given to any nation having the support of the League in any difficulty or war that might arise. It was also an institution for the purpose of collecting information, which was made available to the banks which became shareholders. It would be for the directors of the Reserve Bank to decide whether the advantages wore such as to make it advisable for the bank to take shares in the Bank of International Settlelucnt*. Decision was left entirely in the directors’ hands as to whether they should accept any liability that would be incurred by taking shares in the international institution.

SIR. DOWNIE STEWART’S OPINION

Mr. Forbes pointed out that the Bank of International Settlement was not concerned with any question of currency. The internal monetary policy of the Dominion or of the Reserve Bank would not be affected in any way. Mr. W. Downie Stewart (Govt.— Dunedin West) said he thought thaV too much importance was being attached to possible dangers arising under the clause. The country would be taking shares in the Bank of International Settlements and would require a voice in its policy. If questions of international policy were to be opened up, surely it would be much wiser to have a voice than not. He had always understood that those who held that the depression was partly caused by international monetary policy were agreed that onlv international monetarv policy could remove those causes with anv effectiveness. The country could not get out of its difficulties unless there was co-operation with other countries. He thought that the directors of the bank would be wise enough to see whether or not it was in New Zealand’s interests to have shares in the Bank of International Settlements The amendment was defeated by 43 votes to 26, and the clause was passed. Speaking on the clause relating to the taking-over of the gold held by the trading hanks, Mr R. A. Wright < Indept.—Wellington Suburbs) moved that in the event of any dispute over the price of the gold between the banks and the Government the price should he fixed hy arbitration. He said that this provision had been in the original bill, and it seemed to be one of common justice He knew that the banks were unpopular, but they had just as much right to justice as anyone else BANKS’ GOLD RESERVES. Mr Savage said that this was one of the clauses in the bill in which it was possible to find any justice at all. Lnder the war legislation the banks had had their gold reserves protected and had

been enabled to carry out trading operations bas<?d on tbe public credit, inakins huge profits. They had absolutely no moral claim to the advantages of fluctuations in the price of gold which they had been allowed to retain by Act of Parliament. Mr A. E. Ansell (Chalmers) expressed surprise at Mr Wright’s amendment. It asked for an impartial tribunal but he would like to ask it the Chief Justice was a shareholder in the Bank of New Zealand. Mr A. J. Stallworthy (Indept.— Eden): You are making a very serious statement. Mr Ansell said ho considered that the Government's decision was morally and legally correct. , . . Mr Stewart said that when he had introduced the Reserve Hank Bill last vear he had made provision tor a tribunal, and if the banks were dissatisfied with the present provisions of the bill it was very much their own fault because they had delated the bill which he had introduced. Mr Stewart said that Mr Savage, Mr Ansell and others had based ments on the assumption that the decision of a tribunal would go against X Government. Surely, if their case was so strong-arid he «’ ns J d ®^ d the Minister of Finance had made out a very strong case-there should be no

ground for anticipating that the decision of an impartial tribunal would be in favour of the banks. POSSIBILITY OF ARRANGEMENT. Mr J. A. Lee (Labour —Grey Lynn): Who is to rule —Parliament or the Supreme Court? Mr Stewart said that if some arrangement could be made whereby it would be possible to ensure the friendly co-operation of the banks he believed that steps should be taken to make such an arrangement. Replying to Mr Ansell’s remark as to the possibility of a judge having shares in the Bank of New Zealand, Mr Stewart said; “Surely Mr Ansell must know that under such circumstances a judge would refuse to act on the tribunal.’’ The Minister of Finance (the Rt. Hon. J. G. Coates) said he was sorry that he could not accept Mr Wright’s amendment, and he did not think he would be right in suggesting that the House should adopt it. The clause indicated the considered opinion of the Government. There were some who believed that the clause dealt unfairly with tho banking institutions of New Zealand and so far as he was concerned ho was prepared to keep the matter open. If the banks could show that they had a case—if, between now and the time the Reserve Bank came into existence, they could show that Parliament had been treating them unfairly in respect of the gold they held—the matter could come before Parliament again. He had not so far been convinced by the representations which had been made, but he recognised that the Government must be impartial in its judgment. So far he had not seen anything which would justify alteration of the clause. The amendment was defeated by 56 votes to five. Those supporting Mr Wright were Mr W. D. Stewart, Mr H. Atmore, Mr J. Hargest and Mr C. A. Wilkinson. THE DIRECTORATE. Mr F. Jones (Lab. —Dunedin South) moved an amendment to the clause dealing with the constitution of the board of directors to the effect that the whole directorate should be appointed by the Governor-General-in-Council. He said that the object was to make the bank a Sjtate institution. The amendment was defeated by 43 votes to 24 Mr W J. Jordan (Manukau) moved an amendment designed to give voting power io the Secretary to the Treasury (who is a member of the board under the provisions of the bill) Mr Coates said that the Secretary of the Treasury would be in a stronger position if he’ were not compelled to vote. The amendment was defeated by 43 votes to 24. By another amendment Mr Savage sought to provide that the bank’s governor and deputy-governor should be appointed by the Government on each occasion. Mr Coates said that adoption of this amendment would mean that the shareholders would have no say in the appointment of these officials. He pointed out that a report on the operations of the bank would be submitted to a meeting of shareholders, who, if they were satisfied with the administration, would recommend the reappointment of these officials. Whatever appointment was recommended by the shareholders would have to be approved by the Government. The Minister expressed the opinion that there was a definite advantage in the bank’s report being open to examination and approval by two distinct sections of the public—the shareholders and Parliament. CLAUSE POSTPONED. I Mr. W. J. Polson (Stratford) said he agreed that the governor of the bank should at all times be appointed by the State, but ho was not satisfied with the wording of Mr. Savage's amendment. He himself would subsequently move an amendment which he considered would meet the position more satisfactorily. Mr. Savage’s amendment was defeated by 39 votes to 25.

Mr. Coates then suggested a postponement of consideration of the clause. lie said that, he had in mind an amendment whieh would set out that the board of directors should recommend the appointment of the gevernor and deputy-governor. It would then be for the Governor-General-in-Council to say whether these appointments were acceptable or not. The clause was postponed. Mr. D. W. Coleman (Lab.—Gisborne) moved to extend to members of Parliament and servants of the Crown the right to hold office as members of the board. This was defeated by 40 votes to 24.

The remaining clauses of tho bill were then passed. At the instance of the Minister of Finance an amendment was made to the clause relating to shares in the bank. A proviso was inserted restricting the issue of shares to British subjects who are ordinarily resident in New Zealand or who, having been so resident, may at the time of allotment temporarily be out of New Zealand for the purposes of their business or other sufficient reason.

Mr. P. Fraser (Lab. —Wellington Central) asked whether it would be illegal in the event of shares being listed on the Stock Exchange for them to be sold to any person other than a British subject.

Mr. Coates replied in the affirmative.

RESTRICTED TO NEW ZEALANDERS

Tho Minister explained that the amendment covered the point raised by Mr. Wright yesterday. It was more satisfactory because it did not debar a person who might temporarily be absent from the Dominion for some good reason from holding shares. Consideration of the clause relating to the appointment of the governor ond deputy-governor was then resumed. Mr F. Lye (Waikato) said that he and other Government members had given a great deal of thought to this matter. He had two suggestions to make: (1) That the governor and de-puty-governor should be appointed by the Governor-General-in-Council on the recommendation of the Minister after consultation with the board ; (2) that the governor should bo appointed be the State and the deputy-governor by the board. In the event of the hitter suggestion being put into effect, he suggested that the governor should have a deliberative and casting vote and that the deputy-governor should be without a vote. If tho former suggestion wer® adopted, he suggested that the voting should, be in the usual

manner, the governor having a deliberative and casting vote. Mr Lye mentioned that he had studied the machinery of 17 reserve banks in other countries, and in 15 instances tho governor was appointed by a State head and not by the shareholders.

Mr Polson said he was satisfied that the community would definitely prefer that the State should have control of its own machine. AGAINST STATE APPOINTMENT. Mr Coates said his suggestion that the appointments should be recommended by the board of directors and approved by the Governor-General-in-(Jouncil would maintain that element of removing any suspicion that politics were participating in tho running of the bank. Many people would say that because the appointment was made by the Governor-General-m-Council it was a political appointment, and attention should bo paid to this aspect, because the success of the bank so greatly depended on the public being satisfied that politics were not unduly entering into the management of the bank. Mr Savage: Unless it suits the board no man will get its recommendation. Mr Coates: If he is not suitable to the Government, or if a deadlock arises, the matter will be dealt with by the Governor-General-in-Council. Mr Savage: Why not make it a straight-out State appointment? Mr A. E. Jull (Govt.—Waipawa) said he believed that there should be co-ordination between the board and the Government, but he thought that the Minister should make the recommendation. Mr Coleman asked what was the difference between the proposed amendment and the original clause. Mr Coates said that the meeting of shareholders would make its recommendation and go home. It- would not be possible to negotiate with tho shareholders, as it would be with the directors. CLAUSE AMENDED. 'k On Mr Coates’ motion the clause was amended on the lines he had indicated—namely, that the appointment of the governor and deputy-governor (other than on the first occasion, when the appointment will be made by the Governor-General-in-Council) should be made by the Governor-General-in-Coun-cil on the recommendation of the board of directors.

The committee stage was then completed, Mr Coates being applauded. The bill was reported to the House at 12.45, and the third reading debate lasted till 3.10, when the bill was passed. The House then adjourned till 10.30 a.m. I