INTEREST RATES

Hawke's Bay Tribune, Volume XXVI, Issue 227, 8 September 1936, Page 8

INTEREST RATES

Auckland Savings Bank Replies to Minister KEEPING RATES DOWN By Telegraph—Press Association AUCKLAND, Sept. 7. A defence of its policy in making loans to local bodies and in fixing interest rates is made by the trustees of the Auckland Savings Bank in reply to criticisms by the Minister of Finance,

the Hon. W. Nash. They state:— “The Minister seeks to imply that there is a desire on the part of the

trustees to increase interest rates. They hasten to assure him that this is not the case. They would remind him that For several years past their policy has been in the direction of keeping lending rates as low as possible. Their rate has invariably been at lo ast j per cent, lower on mortgage investments than that charged by ordinary lenders, which policy was continued notwithstanding the complaint that the bank was an unfair competitor for this class of secur-

ity. When tho mortgage rate fell to 5 per cent, and under, the bank, while adopting the rate of 4J per cent, for new loans, voluntarily reduced the interest rate of all loans then current to 4j per cent., a concession .which was greatly appreciated by thousands of its borrowers. "The trustees assert that no lending institution has treated its borrowers so considerately as the bank has done, nor I advanced money on such favourable terms of repayment. The bank, they say, has also fully played its part iu taking up Government and local-body loans and has been extremely helpful in this direction on many occasions. “Out of the cash reserves of the bank held at the close of the financial year the trustees have advanced or contracted to advance to local bodies £250,000 at 3j per cent., thereby showing that on approved investments over a satisfactory period of years they were prepared to accept the low rate of interest then being offered. This surely is unmistakable evidence that the bank is not endeavouring to drive interest rates to high levels. “Regarding the net profit of the bank for last year, to which the Minister has made reference, he has inadvertently omitted to mention that from the sum quoted have to be deducted the income-tax payable for the year and provision for contingent losses on morti gage securities which may be expected to result from the fall of land values. When these reductions were made the net profit was a relatively small one. “The trustees see no reason to alter the policy of administration which has I always distinguished the work of the bank in the past and which has proved so successful, and they feel sure that the Minister of Finance will concede

this position and admit that he may have come to a hasty decision on insufficient information when he stated that the bank was endeavouring to raise interest rates in the Dominion against the policy of the Government and against the future development of the country.”