Manawatu Evening Standard. WEDNESDAY, AUG. 1, 1928. THE SAVINGS BANK POLICY.

Manawatu Standard, Volume XLVIII, Issue 208, 1 August 1928, Page 6

Manawatu Evening Standard. WEDNESDAY, AUG. 1, 1928. THE SAVINGS BANK POLICY.

Members of the Labour Opposition during' tlie discussion on the Imprest Supply Bill, No. 2, in the House ol .Representatives on Eriday, made a rugorous attack on the Government, for allegedly driving money away from the Post Office Savings Bank in the interests of the associated banks. The facts are quite simple. The Government, at a time when money was not too readily available for its many commitments arising out of the war, and the repatriation and settlement of our returned soldier settlers, extended the limit of deposits upon which it was prepared to pay interest to £SOO(J, and, in the result, business firms, companies and individuals with sums of money lying temporarily idle, got into the habit of depositing such sums with the Savings Bank whence, being at call, they were easily withdrawn after earning the interest payable upon them on the monthly balance. The policy which led to the acceptance of these larger sums was, to say the least, an embarrassing, if not actually a risky one, for it compelled the Savings Bank authorities to keep considerable sums available to meet any sudden calls upon it. Large sums of money are paid annually to the credit of depositors' accounts in the shape of interest. Over fifteen millions was thus paid to their credit during the 10-year period 1917-1927, which accounted for all but four and three-quarter millions of the increased amount held by depositors in the bank at the end of the 10-year period. Necessarily the Postmaster-Gen-eral has to seek investments for the moneys lodged with the bank, if he is to find the large amount of interest paid to the depositors every year. As a matter of fact, for the last three or four years of the 10-year period to which we have referred, the interest payments failed .to maintain _ the amount to the credit of depositors at the end of the previous year. On 31st March, 1924, the total to the credit of depositors was £46,098,421. The following table illustrates the position for the next three years, viz.:—

Total Interest to credit of Year ended Added Depositors. March 31. £ £

In each case, therefore, apart from the added interest, depositors had added less to their accounts than the amounts they held in the preceding year; and, as the bank was compelled to hold, in liquid form, a considerable portion of its assets to meet

the calls the larger depositors might make on it at any time, it was not in as good a position, from the revenue earning standpoint, as it would have been were it not handling these larger sums. As a matter of policy, therefore, the Postmaster-General took upon himself to obtain legislative authority to reduce the amount upon which the bank was paying interest; but, as the Minister of Finance informed the House on Friday, the bank was largely relieved of the necessity of reducing the bigger deposits by the disappearance of the larger amounts, as the result of the action of a number of people withdrawing their money, possibly as the outcome of the banks raising the interest rates. It would have been foolish of the Post Office Savings Bank to have followed suit, even had it been considered wise to cater for the larger deposits; because, accepting such moneys on call, it could not expect to earn interest on them at the same rate as the banks would do with the mone3 r s on fixed deposit, and it is an open secret that, last year, the withdrawals were very considerably in excess of the deposits, as they had been for the six preceding- years, the excess of withdrawals for that period being over £4,40(3,000.

CALL MONEY EMBARRASSING.

Rather ingeniously the Labour Oppositionists have endeavoured to give currency to the idea that, by its change of policy in regard to these larger amounts, the Government has “driven” from £3,000,000 to £5,000,000 from the Savings Bank to the associated banks. The member for Auckland West placed the total at the smaller amount. His leader (Mr H. E. Holland) made the wider statement of £5,000,000. Mr Savage argued that, by reducing' the maximum amount upon which it was prepared to pay interest and administering the Post Office Savings Bank “unsympathetically,” the Government had played into the hands of the private banks, which had increased their deposits very considerably. The member for Auckland East (Mr J. A. Lee) claimed that by refusing “to accept money in the Post Office Savings Bank at per cent.”, the Government had had to borrow money at 54 per cent. Both statements misrepresent the position. The truth is (as stated by the Minister of Finance) that “it had been found of no value to hold the large sums, which were an embarrassment to the Savings Bank, in that it had always been necessary to hold large reserves in order to meet big- withdrawals. Merchants . and others kept large sums. at the■ Savings Bank as a, matter of convenience, and withdrew them without warning.” The Post Office Savings Bank was never intended to cater for the class of people who have profited by the mistaken policy, followed of recent years, of paying interest on sums up to £‘sooo whicn were deposited, as all other of the bank’s deposits are on call, and the Government acted wisely, last session, in legislating in the direction of enabling the PostmasterGeneral to reduce the amounts on which interest is payable, so relieving the bank of an embarrassing and possibly dangerous position. Relieved of the .liability of finding the interest on such deposits and of the responsibility for handling them, the bank takes on more of its true character and will reflect more truly the savings of the people.

1925 ... ... 1,680 ,920 46,948,628 1926 ... ... 1,731 ,578 47,911,832 1927 ... ... 1,767! ,426 48,985,502