THE BANKS AND THE PRESENT DEPRESSION.

North Otago Times, Volume XXVIII, Issue 2201, 21 May 1879, Page 2

THE BANKS AND THE PRESENT DEPRESSION.

The following article on the relation of the banks to the present depression of trade in the colony appeared in the LytUlton Times of Saturday last. It expressia vi*ws similar to those expressed in an editorial which appeared in this; joornal on the aame date, bat our ©ontemporary 1 * article enters into modi fuller details: A perusal of the bank returns for the quarter ending March 31 last discloses results for which we had not been quite prepared. We have heard much of the tightness of money and the consequent public inconvenience, caused by the restriction of bank accommodation — a policy ascribed to all the banks, but in which, for some reason, the Bank of New Zealand has been supposed to be foremost. We did not ourselves before that this bank had so entirely departed from its traditional polioy, but concluded that •ren a prudent and necessary oheck to its adranoce was sererely felt by reason of the Urge business of the institution and its usually liberal policy. The opinion is more than borne out by the bank returns, which show thai in. the March quarter the three foreign banks, as they hare been called, have reduced their adTsnces by 1490,000, while the Bank of New Zealand has increased its accommodation to the public by L 170.000, the National Bank having also increased its advances by LUO.OOO. This we think a jcireumstanee of much significance, as tending to confirm, a prevailing impression that in a time of difficulty and pressure the interests and wants of the colony are likely to receive greater consideration from institutions locally controlled, than from those which must carry out a policy dictated from abroad. As we expected, we fail to discover from these returns that existing monetary pressure is in any degree caused by the action of the banks as a whole ; restriction by the foreign banks being more than compensated by increased facilities allowed by the local institutions. ' The causes of the tightness are easily to be found in the reduced value of colonial products — a deficient harvoet— and last, but not least, in the rashness of mang-* people who have incurred obligations which they have not the means, nor the credit, to meet, and who naturally seek to fix the blame anywhere but on themselves. To these cauces we might add the check to the flow of money for investment in the colony, caused by the late financial crisis in England ; and the failure to organise new lending companies to be the channels for such investment in proportion to the rapidly increasing wants of the oolony. While looking into this subject we have endeavored to find out how far the banks themselves suffer from the scarcity of money which affects so many of their constituent*. The quarterly returns do not adequately supply this information, as they deal only with with cash resources actually held in New Zealand : nor have we been able to lay hands on balance-sheets of late date of all the banks. We find, however, that at their

balance on March 31 last, the Bank of New Zealahd showed : Coin and cash balances £1,725,000 Bullion 197,000 Government securities 629,000 £2,551,000 The Union Bank shows as at December 31 last : Specie on hand, and cash balances £1,240,000 Bullion 141,000 Government securities 387,000 £1,768,000 The Bank of New South Wales ahows as at March 31 last : Coin and cash balance £2,658,000 Bulli»n 272,000 Government securities Nil. £2,930,000 Each bank having special liabilities for Government deposits. These, in the ease of the Bank of New Zealand, would appear by the quarterly returns to be L 869.00 0; but as this figure represents the average of the quarter, the amount at March 31 is no doubt much less. As regards the liability of this bank to make advances to the Government, it is significant that the bank is already holder of Government securities to the extent of L 629,000. which, for anything that appears, may in fact cover all the advances it can be called upon to make The liability of the Union Bank to the Queensland Government was, at the time, probably nil, but they are holders of L 156,000 New South Wales Government deposits. The Bank of New South Wales appears at the date of its last balance, to have had L 1,200,000 of Government deposits. Estimating the liability of the Bank of New Zealand on Government account at the date of its balance at, Bay L 500.000, the resources of the three banks in cash, bullion, and Government securities, less Government deposits, would stand thus : Bank of New Zealand £2, 050, 000 Union Bank 1,610,000 Bank of New South Wales .. 1,730,000 We do not pretend to co exhaustively into the finance of anyone of these banks : the figures available to the public do not afford the means of doing so conclusively : while an attempt of the sort might be an injustice to one or other of them, and create interminable controversy. It is enough that we can see nothing in the position of three of the leading banks trading in this colony, which is otherrise than reassuring, and calculated to inspire confidence. In this connection, and as an instance of Government financial policy, the action of the New South Wales Government is noteworthy. Having some three millions on deposit with the Sydney banks, they nevertheless have just raised a loan of over three millions. The reason given, as we believe, for Ihiarather singular procedure is that it would be highly inconvenient for the banks, and therefore dangerous to the colony, were they at present called upon to repay this money.