BANK'S PLAN APPROVED

New Zealand Herald, Volume LXIII, Issue 19418, 28 August 1926, Page 12

BANK'S PLAN APPROVED

ASSISTANCE BY STATE. ALTERNATIVE SUGGESTIONS. ... • EXTENSION OF PRINCIPLE. FACILITIES FOR OTHER SCHEMES. [BY telegraph.—press association.] WELLINGTON, Friday. Dealing with the proposals by the Bank of New Zealand to establish a special department for the purpose of making long-term loans, the report of the special committee on rural credits states: — The Bank of New Zealand proposes to increase its capital, for the purpose of adopting an amortisation system for farm mortgages, by £5,625,000 with power to raise further capital. . Of the initial sum £1,406,250 is to be shareholder capital and £4,213,750 debenture capital, the lending rate to borrowers to be 6 per cent which, although; slightly over the State advances rate, is lower than the average rate at present obtaining for mortgage.

In order to ensure this rate the bank is conceding to this proposed. branch of its business such profits as may be needed to assist and assure shareholders in this capital issue an earning of per cent, on the shareholders' investment. Without the proposed assistance tms business would not, it is estimated, realise above £4 10s 5d per cent, To bring that earning rate to approximately 5 per cent, and maintain a lending rate not exceeding 6 per cent, the committee after due consideration recommends for favourable consideration : (1) An adjusted assessment of taxation on this branch' of the bank's business, or (2) Acceptance by the Government of its one-third holding in the new issue of preference shares at 6 per cent.

In conclusion the committee desires to express the opinion that there is need for private- lending institutions and banks assisting in the farm mortgage business on the amortisation principle, as it .would be of material assistance to the producers and especially to those whose needs are beyorig the limits" prescribed ' by' the Government. -The committee recommends that provision be. made when convenient' for giving, such facilities as will encourage the formation of such institutions or banks and the adoption of such amortisation schemes.

DEBATE IN THE HOUSE. HOW TO GET MORE MONEY. MEMBERS AIR THEIR: VIEWS.," [BY TELEGRAPH. —PRESS ASSOCIATION.] WELLINGTON. Friday. In the House this afternoon Mr. D. Jones (Ellesmere) read the report of the committee set up to consider the rural credits proposals of the Royal Commission and of the Bank of New Zealand. He moved that the report be referred to the Government for consideration. He described the report of the Royal Commission as a very valuable document. Mr.; M-a-\L 1 Savage '(Alickland • West ) said if it was a " valuable document it had cost'us 1 £6140 to get .it,'.-and then no one was- told anything they could ' not- have found out ;in>any public 'library.* There was a; chance of the farmers getting something out of the Bank of New Zealand proposals, but there was not a million, to one chance of thoir getting anything out of the report, of the Royal Commissjtin^which hiid cost us £61.49 co get. The : 'q£iestfon was how-to get more money.: He predicted' that" until the State took in hand the banking' question Ifor its oi*n . it- wduid , ;never solve - the , problems, by. which.,, it. ; was faced. 1 ; .He suggested . that'" 'a;' Parliamentary -Colfrilhittee • should have ;: an* opportunity of investigating rural credit and ; the whole, banking system, of the Dominion not during the session, but during the recess, when there Was a reasonable' chaince oi dealing with it properly • • ••• - <• . The Cry,, for Money.

Sir .Joseph rWard (Invercargill)r said the reason why .the Public Accounts Com< mittee had 1 brought down' thfs hurripfl report' wns that ; there were thousands of people in New" Zealand scrying out for money, and there .was need for legislation this session. They could not wait for the establishment of ' a State bank. It took Australia" from eight to 10 years to estab-' lish its State bank,vapd they could not wait so long. He was in favour of a Stats bank if the State purchased the Bank of New Zealand at'a fair price and cut i£ adrift from politics and governed it on banking lines. We had gone too far with the Bank of New, Zealand to establish a competing bank, but he thought we were still a long way off that. Complaint had been , made as to the cost, of the Royal . Commission, but .its value was that three men had gone over the world and seen various systems for themselves, and they came back and told us that our .State Advances Department was-the best system they had seen. Ho favoured issuing bonds as recommended H 3 a trial.' If it was'not a success some other arrangements; could be made next session.-but they could not afford to wait for several years. He thought highly of the Bank of New Zealand scheme, r and tjvery other bank should have an opportunity to establish a similar scheme. Continuing the debate in the evening Sir Joseph said he considered the Bank of New Zealand's proposal a very fine one, the finest indeed that he had seen made by any bank in the world. Not in Order of Heference. Mr. W. D... tysnar (Gisborne) protested ■ {.gainst- the bank proposal bei.xg included in . the ' commission's" report, as it. was not mentioned in tho order <.f reference. Mr.' J. McCombs (Lyttelton) said 'tho commission had cost* six - thousand pounds and members could have got books costing a. few shillings that, would have provided more and better inform'ation on the subject'. ' ' ' Mr: G, W. Forbes, Leader of • the Nationalist Party, said,' he doubted if the Bank of New Zealand would > have formulated its scheme, but for the agitation for an * agricultural bank. The Government had - managed to stave off the awkward., question of; providing. a farmers' banking institution by appointing a commission of inquiry, and now it" looked as' if 1 the matter would be postponed .over-.this, session. Any issuo of f armors' bonds' should be backed by a Government guarantee if the money was to be obtained at a reasonable rata of interest. The" whole, question should be referred to a committee to prepare, a comprehensive measure for the application of tho recommendations of the commission next session. A Bone of Contention. The Hon. A. D. McLeod said a bone Oi contention ever since he entered Parliament was ■ that tho .State Advances Department was npt liberal enough Arguments were used time and again that an agricultural or State bank could provide money for. farmers more cheaply ine commission's report was justified 'if lt satisfied the farmers that the Ad vances Department could meet their needs more reasonably than any system working other countries. After further discussion the motion was adopted.