THE BANKING INQUIRY

North Otago Times, Volume XXXVI, Issue 8653, 19 August 1896, Page 1

THE BANKING INQUIRY

WHAT LED UP TO THE LEGISLATION. (by telegraph.) Wellington, August 17. The following portion of the Banking Inqairy was crowded oub of yesterday's issue : J. Watson, examined : The circumstances leading up fco the legislation of lasb year began aboub June, 1895. Before we got the Elates Comply and the Bank balance-sheet m such a position that we could deliberate, the Colonial Treasurer was on his way out, and ! within ten days or a fortnight of his coming here m July, I met him and told him of the position, and he seemed surprised ab the msgnitude, bob I told him there was no getting away from ib ; th»b Murray and I thoughb the Estates Compomy should be moved from the Bank, because people would never have confidence m the bank as long as there was a chance of losing money through the estabes, although the value of bhe bank had fallen low owing bo the advances having fallen off. I spoke about the discovery of bad debts, and told him ib would require aboub L 400.000 for the loses of the bank, j and further provision to the extent of a I million and a half would be required for the Esbates Company. There was a total loss of L 2,000,000 m the Esbabea Company and the b<*nk, the bank's loss being nearly L 200.000. The Treasurer seemed a good deal put about. He did nob like to broach the subject to his colleagues, bub ultimately bhought the besb way would be to. ask for a conference. I had to send m a return to the Government based on the book values. It was not the firab communicabion as bo the position of the bank. I don'b knowwhah Mr Murray I represented the position of bhe bank. | As to tbe_ representations made regarding the position of the bank, they were noi with resp'.ob to legislation being,neoessary. These were confidential communications, about which I do nob feel afc Hb6r'y to speak. No other member of the Government was made aware of the position. We did nofc know the posibion of the Estates Company until March, 1895. I don't think they know of that L 54:,000 m excess of Hean's valuation. The Governmenb was good enough to grant a conference, and the whole Cabioefc, wibh bhe exception of two members, attended, I believe ib was on bhe 12ih August, 1895. I think the Government auditor waß presenb. We told thei Premier and the rest of the gentlemen present thab they would have to maintain the bank. The Premier asked for certain information, whioh was afterwards laid before the committee. We asked for a million of shares instead of L 500,000. Thab was menbionod ab bhe conference. I don't remember any other conference or correspondence. The bank is always corresponding officially with the Colonial Treasurer. There is correspondence which is not confidential. I assisted m 1 drafting the bill last year, and then oon- j sldered the colony had underbaked a dangerous financial responsibiliby. My opinion was thab as bhe colony had advanced L 2,000,000 to the bank, ifi the bank c«ne to grief, that money wonld be losb ; bub if proper safeguards were taken the coloDy would run very little risk at all, because the only loss would be on the properties handed over fco the Assets Board, for which we had taken sufficienb cover. The negotiations first camo to my knowledge after the legislation of 1894. Shortly after the legislation Mr M'Lean told me Mr Murray w.as anxious bo geb the business of the Colonial Bank, because ib was their grpatest competitor. I was then acting as inspector of the Colonial Bank. Messrs Murray, M'Lean. M'Kenzie, and I came bo an agreement, which Mr M'Lean signed ou heh*lf of the Colonial Bank, and Mr Murray for the Bank of New Zealand. My first idea was that the colony should relieve the bsnk of its globo assets, and the bank should pay a certain percentage of the losses every year. I don't see how the bank could do that without acquiring new business. The directors were unanimous up to the first legislation m 1895. I can Dob tell why they diverged. No difference of opinion or change existed m my mind. One of the direcbors changed his mind aB to the advisableneas of tho purchase. The direcbors wera not unanimous as to the terms of the purchase. I would rather not impute motives drawn from my own conclusions. Mr Booth did not care bo negotiate for the purchase j of the Colonial Bank, bub Mr M'Oarthy | was strongly m favor of it. I don't ] think there was any dispute about the ] conditions. I thought the Colonial Bank ij would nofc give way, and wanted the j agreement concluded. Ib was not a ; unanimous agreement afc the bime. The amount; estimated for goodwill was L 75.000, and the properties fco be taken over ab L 125.000, and sbatlonery acoounb ab two-thirds its value m the books. We made no estimate, bub reckoned bhem up m our onn mind. As for aelliDg purposes, we added on L 30.000 to the L 75,000 for goodwill. There w»s a private agreement thab cerbain advances were to be secured. We did nob include the properbles m the value of the goodwill. The L 30.000 was nob contemplated as parb of the goodwill, Sbub I contemplated we could lose L 30,000 m consideration of the good business we gob. An offer was made which would have made tho security worth more than 20s m the pound.