BANKING IN NEW ZEALAND.

Lyttelton Times, Volume LXXXI, Issue 10309, 30 March 1894, Page 5

BANKING IN NEW ZEALAND.

(Australasian Insurance and Banking Record.) The popular tendency in the colonies to class banka as local and “foreign ” is in itself extremely regrettable, as calculated to improperly establish artificial and invidious distinctions. The local prejudices in this matter are frequently inflamed by those not very scrupulous politicians and by that large section of the Press who seek to gratify local aspirations at the expense often of veracity, and always of good feeling. 111-will has recently manifested itself in New Zealand, because what are called the “foreign” banks (which, however, as a matter of fact preceded the New Zealand banks), and especially one of them, have not so much money lent out in proportion to tbe local deposits as formerly. It is altogether overlooked that the circumstances of tho colony have altered very materially during thp last few years. When inflation was the order of the day the New Zealand public were deeply indebted to the banks. Then came a long period of crisis, during which large writings-off were made, while trade was very greatly reduced. A great expansion of exports followed, marked, as proceeds flowed in, by a rapid extinguishment of a great deal of private indebtedness. As debt was paid off, banking deposits again increased. Now, all this was natural enough, and it ia no fault of the banka that their borrowers elected to reduce their indebtedness as they found themselves able to do so. Just to illustrate tho course of events we reproduce a few figures from the New Zealand quarterly banking averages as follows : Eatio of Discounts, Discounts, Deposits. Advances, Advances, &c, Ac., to Deposits. £ £ Per cent. Dec, nuar., 1883 ... 8,614,572 15,639,090 181 „ 1889 ... 11,591,601: 1-1,840,362 12S „ 1893... 13,985,313 15,021,868 107 Thus, during tho last ten years the deposits of the colony have increased by £5,340,741; the discounts, advances, &c. (including the Bank of Now Zealand’s holding in tho Estates Company), have decreased by £617,228, and tbe ratio of the second to the first item has fallen from 181 to 107. We are inclined to call this solid progress, and to compliment the colony of New Zealand on its gradual emancipation from private indebtedness. But tho complaint is that some of the banks are not leading freely. The reply can only be, categorically, that they are lending as freely as circumstances will admit, and will be very glad to entertain any sound new business. The mercantile business falling to the -banks in New Zealand has, however, seriously fallen off; and, owing to tho hand-to-mouth character of the trade, and the restriction of credit, it hardly appears likely that it will expand to any material extent tor some time to coma. Tho contraction of discounts is shown by the following figures: — Notes and Bills Discounted, December quarter, 1883 £4,48-1,347 „ „ ISS9 2,718,838 „ „ 1893 2,336,528 It ia pretty clear that relatively to banking resources there is less scope for doing business than formerly, notwithstanding, or rather because, the colony has vastly improved its position. The contention—and this is really what the detractors of the “ foreign” banks are really aiming at—that the banks must utilise the deposits they receive in making careless advances, at the discretion, not of themselves, but of the borrowers, or to placate public opinion, is simply preposterous, and it is a pity that tbe rough-and-ready and rather gasconading Premiere? the colony has seen fit to endorse such pernicious nonsense. What has really constituted a drawback in New Zealand for some time past is a high average deposit rate, for in some measure it has tended to check enterprise. But the tendency to stringency, indicated by this high average, is a sign that the process of harmonising deposits and loans on a uniform basis has not yet been finished. In the meantime New Zealand, being a free country, depositors are at liberty to place their money where they please, and they are certainly wise enough to seo that it would be impolitic to stipulate how it is to be employe4. When New Zealand offers a larger field for the use of banking money it will be forthcoming.