BANKS’ LONDON FUNDS

Manawatu Standard, Volume LVI, Issue 8, 7 December 1935, Page 2

BANKS’ LONDON FUNDS

TRANSFER TO DOMINION. OVER £3,000,000 ALREADY. A considerable movement of London funds, attributable to the influence of the exchange policy announced by Mr M. J. Savage immediately following the success of the Labour Party at the polls, is disclosed by the Reserve Bank return, which appeared in Thursday’s Gazette, issued in Wellington. The statement shows the position of assets and liabilities at the close of business on Monday last, December 2. The value of the sterling exchange reserve was £20,674,768, compared with £17,458,573 in the last previous return, which showed the'position at the close of business seven days before, on Monday, November 25. Thus the value of exchange held has increased by £3,216,195 during the intervening week.

RESERVE BANK DEPOSITS RISE.

Indicating the reason for this accretion of London funds, the deposits of the trading banks with the Reserve Bank rose in the same period from £5,256,643 to £8,628,911, an increase of £3,372,268. Other transactions will be reflected in these movements, hut the correspondence of the two figures is close enough to point to hut one conclusion, that the trading banks have disposed of a substantial amount of sterling funds to the Reserve Bank, being credited with the proceeds in their deposit accounts in New Zealand (says the Auckland Herald). The transaction is a natural one from the banks’ . point of view. A pending revaluation of the New Zealand currency in terms of sterling has been announced. Therefore the banks are turning surplus London assets into New Zealand currency while they are still entitled to receive £124 New Zealand for £IOO sterling. The first reduction in exchange to he expected in terms of Mr Savage’s announcement will mean that £IOO sterling will realise only £l2l 10s New Zealand.. OBLIGATION TO PURCHASE. The obligation of the Reserve Bank to purchase sterling is stated in section 16, sul>section 2, of the Act instituting it as follows: —“On presentation at the head office of the Reserve Bank in Wellington of gold or sterling for immediate delivery in London, in either case to an amount pf not less than five thousand pounds, it shall be the duty of the bank to give notes of the bank in exchange therefor.” By the Finance Act, 1934, the minimum value of sterling exchange the bank is obliged to purchase was reduced to one thousand pounds. The trading banks are able to have their deposit accounts credited with the proceeds of sfles, instead of receiving notes in payment. The assets held in London by the six banks on account of New Zealand business were shown as worth £12,293,367 at October 28, the latest date at which information is available. These funds have fallen substantially in recent months, for the figure on September 30 was £16,206,526. while at the end of July the banks held £18.266,133 between them in London on New Zealand account.