DEPOSITS AT CALL

Nelson Evening Mail, Volume LIV, 24 March 1921, Page 4

DEPOSITS AT CALL

FINANCIAL AUTHORITY’S VIEW It is evident that the Mortgages Extension Amendment Act, in its applicalion to deposits came as a surprise to the business community, jtidgirig from the interest with which it diS; cussed, says the Post. A finahrial auIhority, in speaking to a representative of the Post on the subject, (remarked Hint the first indication that some move was afoot was evident tvhon the Finance Hill was issued, clause 13 of which was to extend the application of section 46 of the Finance Act. 1916, to “nersons.” Previously section 46 applied only to banks. “Person” would include firms and companies. “On introducing the Mortgages Extension Hill into the House,” the authority stated, “the Minister of Finance (Mr Massey) intimated that ho ''purposed dropping section 13 of the Finance Hill, which, had it been passed, would have provided that it would not , he lawful for ‘any person, firm or company’ to carry on the business of banking in New Zealand except under the. authority of an Act of Parliament or Order-in Council, .and on conditions prescribed in such Order-in-C'ouncil. “No doubt what was intended, hud section 13 been adopted, was that when the moratorium was applied to deposits firms and companies accepting deposits would have been considered banking institntions in terms of the proposed amendment, to section 46 of the Finance Act. 1916. Apparently clause 13, was ancillary to the moratorium affoctiiig 4qposits, and. presumably, it was intended had the proposal been proceeded with, that firms taking deposits would have bepn required to conduct their business under conditions proscribed in an Order-in-Council. Presumably also their affairs would have been investigated, apd,they ■would have required Lq have shown that thov had sufficient liquid assets to frieeb their deposits. ® “If this assumption is correct, this was a cumbersome method pf protecting depositors. The simplest. _ and, almost t-hp obvious, way would have been to declare so long as depositors- wpr© (restricted in the withdrawal of their deposits. that they should be protected by being declared preferential creditors. Depositors rank with ordinaa-v.t’rade creditors, and to the extent that an Unsecured creditor mayoress for his debt while a depositor is prohibited from doing so,the depositor is undoubtedly in a worse position. No doubt he could make application to the Supreme Court. The speaker proceeded; “With regard generally to the question of taking deposits by business firms, deposits at call have, always been considered an. embarrassment. and such firms_ as. have.taken deposits have usually stipulated for' a. definite period.,. Many - firms have refused to take deposits iindeiyany.consideration; others basb taken them, to .accommodate clients - and there is no doubt that others again, and particularly some of the cpmpjpie?, liavo tnkefi deposits frbm olioptb.%'|«hb regular teursb m business It that during the .last six or seven month's , some firms have accepted deposits a greater extent) than butfylio practice in Weftihgton genera|ly been to consider deposits, particularly at call, as a. likely source of financial embarrassment. It has been a pommoh practice in Wellington for years pastfqr some firms to accept deposits at certain limes of the year—it may bo on the stipulation that they shall he repaid as produce, or other consignments.,' are liquidated. ... - ■) “I think yon will.find that it is/gpn- . orallv felt that the reoeiit legislation,was a wise move on the part of the Government. hat?,, lotion, it is inevitable dividual, cases offibarTassihfeUt will bq imposed if the borrower takes adv r antliiigft of the moratorium. has been passed, it by no that it will be firms jpay be gl'Sff of having their dep f 6&i^)e^bnded,,.but, on the other hand; other? will repay the depositorsmt due date in'’the ordinary course of affairs. # - , b Concluding, the speaker interviewed said it was evident the measure = had been put through as a precaution -and to protect persons and firms who hap accepted deposits against .financial,pni-r , barra-ssment at a time when however soUiM.-.finahciaUy. y ipfiaMligb might find it difficult to keep a proportion of their assets in liquid fontf. EXTENSION OF TERMS A point in regard the extension of the term of deposits at caU, which has been the subject of question., is how the new legislation will affect business firms placing largo sums on deposit so that the motley will bo available to meet bills falling due, and will yet not be lying idle in the meantime, This matter was referred to the AttorneyGeneral (Sir. Francis Bell) by a Post reporter yesterday. . The Attorney:Geheral was emphatic in liis ithtetoeht in teply "that this case had befed presented as an argument, but there were very few persons A .who were affected in. of people hPd„ put their mphey-Op■ deposit, leave it; there*.and interest at suQh,_ft' .high rate that they : wished to) do .bettef. i . - • > Asked how the law worild affecb. the position of , persons and firms who wished to withdraw the money to meet genuine debts, Sir Francis said; “There is no statutory extension beyond 31st May. Any extension beyond that date would be by the deliberate act of _ the company holding the deposit in giving notice.tp the,depositor,, .Jt able that a edihpany notice in cases where it would Jose its business by doing so. But if it did give notice and the notice was ( unfair, tlie Judge has power to determine The notice or to fix the rate of interest. The whole portion the inclusion of the Section 11 of the Mortgages Extension Act, 1919, which reads as follows‘Hn order that full effect may be given, to the intent of this Act the Supreme Court • shall in every matter arising in inspect • of a mortgage to which this Act applies, or an agreement for- sale or purchase, or a lease containing a purchasing clause, have full pwer and jurisdiction to deal with and determine such matter as it deems just and equitable under the circumstances of the case, notwithstanding that express provision in _ respect of such matter is not contained herein.”