THE BANKING RETURNS.

New Zealand Herald, Volume LVIII, Issue 17754, 13 April 1921, Page 6

THE BANKING RETURNS.

..A complete demonstration of the extent of the financial stringency that has developed in New Zealand during recent.months is afforded by the banking returns for the March quarter. The customary comparison with the figures of last year reveals an extraordinary change. Through a combination of circumstances that is generally understood there was then an abnormal accumulation of credit, the private deposits exceeding bank advances by £18,623,000, a surplus that was increased in the June quarter to nearly £20,000,000During the twelve mouths, tho balances on private accounts have been reduced by £3,500,000, whilo the banks have increased their advances and discounts by over £20,000,000, the whole extent of the change, therefore, being nearly £24,000,000. The result is that for tho first time for many years tho bank advances exceed the deposits, the difference being no less than £5,290,000. A comparable position occurred in 1908 when tho financial disturbance that began in New York made itself felt throughout the world. The returns for the September quarter of that •year showed deposits totalling £20,310,007, and advances amounting to £21,217,959, tho excess of advances being £907,952. • To-day, banking business is being conducted on a much larger scale and with a depreciated currency, but it is significant that whereas in 1908 the deposits were equal to 95 per cent, of the advances, the proportion shown in tho latest returns is 89 per cent. As the statutory returns represent the. average position over the quarter, they afford only a modified view of the changes in the situation; on the other hand, the comparison over the whole year tends to exaggerate them. The following summary permits a survey of the expansion of credit up to the middle of last year, and the contraction that has followed in the last nine months:—

These figures show that there has been a progressive decline in deposits accompanied by a larger increase in advances, and while the former is attributable to the general adjustment of prices to lower levels, the combination indicates very clearly that the heaviest demands banks have been due to the excessive importations during the period, involving the export of credit from the country. That the bankers have seen fit to lend so freely to traders and others is not to be taken as a sign of generosity —they would be the last to suggest that their business is conducted on a basis of. sentiment—but as evidence that financial experts, able to judge all the factors in the situation, regard the future with confidence. Nevertheless the. position now disclosed must be recognised as abnormal and, therefore, unhealthy. Since it is due partly to the worldwide depreciation of values and partly to the accumulation of stocks of imported goods and exportable products, the remedy must be found in a gradual adjustment to the new standards of values and in the realisation, as rapidly as possible, of all stocks in which credit is now absorbed. TJig process is certainly hampered by many difficulties, but it must be undertaken sooner or later, and the banking returns indicate that definite action cannot bo long delayed.

Excess of Deposits, Advances, deposits, 1919. £ £ £ March' .. 38,848,826 32,203,646 6,645,180 June .. 43,005,929 32,410,706 10,595,223 September . 45,372,885 30,149,774 15,223,111 December .. 45,569,975 32,106,756 13,463,219 1920. March .. 50,655,091 32,042,043 18,623.048 .Tuno .. 54,598,092 34(789,581 19,808,511 September . 53,131,692 39,017,808 14,113,884 December ,. 49,456,802 47,118,206 2.338.596 Excess of 1921. ■ advances. March .. 47,155,726 52,446,336 5,290,610