THE BANK AMALGAMATION. THE PROPOSAL REJECTED. (BY TELEGRAPH.)

North Otago Times, Volume XXXVII, Issue 8085, 25 September 1894, Page 3

THE BANK AMALGAMATION. THE PROPOSAL REJECTED. (BY TELEGRAPH.)

WjttMNOTON, Buptombor 24. Tho following correspondence* relutivo to fcho pr< poned b»nk ftin>»lf?nmation was laid on tho tnblo of fcho llouso fco-night by the Colonial Treasurer : No. I—Colonial Treivnirrr tn Mr John Mnrray and lh<» Iloti. Gpo. M Lean : Wellington.—- Colonial Treasurer's OHico, Wellington, 22nd Sept., 1894. Gentlemen, — I hare tlio honor to acknowledge the receipt of your letter of the 31th husfc covering thr proposals for amalgamation between the Bank of New Zealand and the Colonial Bank. In reply I have to ftfcuto that the matter has received the careful consideration of tho Government. Without in any way committing the Government to any fixed comae or approval of the proproposals, it will be necessary : I. If any legislation is undertaken by the Government, that it shall bo of a permissive character, to enable tho Government to be satisfied before aosontingtoamalgamation thatthcgeneral interests of tho colony are conserved andprotccted, 2. Thatinadditiontotheaerutinywhiuh traa proposed in tho memorandum of agreement, the Government to appoint a special representative, or representatives, independent of either bank, to examino and report to the Government on the various accounts and asHeta proposed to be dealt with. 3. The shareholders of each bank to bo reftponoihle for and to make good all loasos on the existing buninena that is not passed by the colony's valuers. 4. That upon the expiration of ten years the profits of tho combined hanks shall still continue to be paid into the Estates Company until any deficit in the winding up of the Estates Company is liquidated, and the Government lien upon tho interests of the shareholders in tho Bank of New Zealand to be continuous until all liability to the colony is at an end. 5. The Government to norniflat© the chairman and two directora of the J!»tate« Company, uml the alwreholclera of fcho Bank of Nvw Zealand to nominate two directors to the mimo, tho said Board to have full control over tho uncalled capital of L 1,500,000, 500,000 of the Bank of Now Zealand shareholders. C. In addition to the appointment of the president and auditor to the Bank of New Zealand, the Government to appoint one director to the combined banks. I should like to have your reply to the foregoing before noon on Monday. Tho Government will then further consider the matter, and decide what course they deem it desirable to take.-- 1 have, etc. , «J. G. Waiid, Colonial .Secretary. ]No. 2 — J. Murray to the Colonial Treasurer, Wellington. JJank of Now Zealand, Wellington, 24th September, 1894. Sir, — I hare the honor to acknowledge the receipt of your letter of the 22nd Soptomber, having reference to the amalgamation of tho Bank of New Zealand and the Colonial Bank of Now Zealand, and setting forth certain supplementary conditions as a fiecessary precedent to any action therein by tho Government. These conditions, 1 to 4 inclusive, I would willingly recommend to the bank shareholders, bub I greatly regret that I cannot cay so of Nob. 5 and 6, nor do I think even were I to recommend thorn tho fihateholders in the Bank of New Zealand tvould entertain them. It will probably make tho position more clear if I begin with (5, which is that " in addiiion to the ap. pointment of the president and auditor to the Bank of New Zealand the Government to appoint! one director to the combined (bank. ~ln considering this stipulation I trould oak the Government to bear in mind thai the Bank of New Zealand shareholders &re responsible for the future of the bank, Hot only to the extent of their largo paid-up capital, future profits without limit of time, and reserve liability of L 1,500,000, because Under the terms of the provisional agree* ment 4 per cent it) to be dobitod to the Estates Company on account of the large item " share account," and in consideration therefore, tho surplus profitsafter a dividend of 6 par cent ana L 20,000 to the reserve, tire to be returned to the States Company. Jtfow should thoro bo ineffective manage-ment-the consequences would appear in tho Amount of the purplus to bo paid over to the JCstatw Company, for the outcome of tvhich the shareholders aro liable in the great sums I have named, while with only tour director!) on tho now board to the Colonial Bank's three and a director and president (also a director) nominated by the Government, the Bank of Now Zealand shareholders would be in a minority, though primarily liable for the results, (f'hey would bo at the mercy of persons not of their- own appointment to manage the bank, the Government in maintaining tho audit and power of veto on objectionable business. To take the ordinary manage, ment out of the control of the shareholders while yefc holding them responsible for its results would, I feel euro, bo regarded by them as inequitable. Tho explanations I have given above will serve to mako clear the reason why claiwe 0 also would not be assented to. The shareholders being held responsible to the extent of over JL2,000,000 cannot, J submit, be reason* ably expected to part with the control of their property to a person in whoso selection they hare no say, and hand over to him the powor to make calls upon them. Clearly an botween the two directors appointed, one on each side, tho chairman would exercise, at least aa regards the shareholders, supreme power. At the same time I feel sure there will bo no objection made to the Government taking an effective part, if they wish, in the management of the 10states Company. Jn conclusion I desire to point out that an erroneous impression has been disseminated that legislation is in some way necessary to free the bank from the Estates Company, Except as a condition of amalgamation made by the Colonial Bank there is no such necessity, It is already a woparoto company, and separately administered, though to a largo extent under bank control. M to its being a burden on the bank, it is only so in the «onsc of its being a burden on the bank shareholders, which it must of necessity remain till it bo liquidated, unless tho colony were to relieve them, which nobody proposes. — I have, etc , John Mummy. JSfo, Z—lfon.Z — Ifon. G, M'Lcan to Colonial Treasurer. Dunedin, 24th September, 1894. Sir, — 'I have tho honor to acknowledge tho receipt of your letter of the 22nd 8op» tember, and having submitted the contents to my colleagues, herein reply. Jam deuired to state that the conditions imposed by you make the scheme auoh as we could not recommend to our shareholders. Taking the clauses of your letter seriatim—l, We do not object to the permissive character of the proposed legislation, 2. We have not th 6 slightest objection to your appointing reprcscntativfH U> examine tho condition of our accounts and as»ot«, and refer you to our letter of 20th July, When applying for a share of the Government account we specially asked the Government to do thi« , before giving us that share, 3. This (stipulation is all right, and was fully provided fcr in the agreement. Bo hv nn scrutiny by the other Tmnk was concerned, we have no objection to its application to Huggeat a further scrutiny. 4. This so vitally affects the interests of our shareholders that we will not under any circum»ta»jceB agree tcr propone it to them, ft would be an jnvjlbation £o wpread the realiwalyipn of the Assets Company over «i indef}i»ito pwiod, and would make our shareholders' dividends responsible beyond what can fajrly be asked or was ever intended, This bank will have no voice in the management or realisation of the assets, Regarding Ihn Government Hen on # the interests of tho present shareholder/} in tho Bank of New Zealand, we can raise no objection, 5. This does not immediately concern v«. 0, Tho powers posßeeaed by the Government ropre* ftentative on whose report the acceptance by the Government of the whole scheme will depend must be held to be Bufficient. It is obvious that the presence of a nominee of the Gpvcrnment on the board would detri. mentally affect the business of the bank.

Final clause. Tho assent to the amalgamation on tho part of tho Colonial Bank would greatly depend upon shareholders being represented in the amalgamated institution by men in whom they had confidence. Without this guarantee there would bo little prospect of obtaining the necessary conaont. The attitude which tho direetoi'B at tho general meeting on Wednesday must tuko up with regard to the proposed , amalgamation will evidently so largely depond upon tho answer which wo receive to this that I must ask you to reply as definitely as possible on tho whole affair, not later than noon to-morrow. — I have, etc. , Cljko, M'Lkan. No. 4 — Colonial Tioasurer to Mr John Murrity. Wel'ington : Wellington, 24th September, 1894. Sir, — The Government have carefully considered your communication of to-day, and in reply I have the honor to inform you that they cannot see their way to depart from tho condition named in my letter of tho 22nd inst. ■— t have, etc , J. 0. Wakd, Colonial Treasurer. No. s —Tho Oolonhl Tioaauror to tho Ho». G. M'Lcnn, Duiudin : Sir, — The Government have carefully considered your communication of to-day, and in reply I have tho honor to inform you that they cannot see their way to depart from )he conditions named in my lettor of the 22nd inst. — I Imvo, etc., J. G. Wakd, Colonial Treasurer. In asking loavo to lay tho bank amalgamation correspondence on the table Mr Ward said ho would like to say, in tho first place, that tho communications which had paused from the Government to tho two banks had boen unanimously arrived »t by th» Government. Tho rumors which had prevaMod as to strained rolations between the Premier and himeolf in connection with this important matter weto entirely without foundation, Not only had there been no diversity of opinion, bat they had been in absolute accord in what was done by (lie Government, He wished also to point out how difficult and how impossible it was to carry out the requests of lioti. members to have had tho mutter reforrod to a Select Committee. Tho responsibilities in this matter rested with tho Government, and to havo intorcoptod their judgment or their conclusion on tho matter by relegation to a committee would havo askod tho Houso to place a buffer between tho Government) and the country. He might Bay that whilo tho Government recognised all the advantage that would accrue to tho colony by tho amalgamation they took up tho position of Haying that the first con* federation tho Government had to look to was what was best; in the interests of tho colony, and it would bo soon that tho Government regardel it as an esbonti?! that the interests of tho colony should bo preserved and safeguarded beyond ovorything else. Tho correspondence would disclose the fact that tho proposals made to tho Government by tho two tanks wore not regarded by the Government in soiio most essential features as sufficient to warrant thorn in consenting to some of the proposals, and ho hoped hon. membora when they caw what hod been done by tho Government would givo thorn tho credit of doing what was right and in tho intoresta of tho colony,