THE BANK STATEMENTS.

New Zealand Herald, Volume LXIX, Issue 21076, 9 January 1932, Page 8

THE BANK STATEMENTS.

Statistics of banking in New Zealand during 1931, completed by the issue of the returns for the fourth quarter, form a record of successful efforts to repair the disorder into which the Dominion was plunged by the impact of slump conditions in 1930, and, in spite of persistent depression, to regain stability upon a new basis. By the end of 1930, a heavy strain had been imposed upon banking resources. The fall in prices and the shrinkage of domestic business were reflected in a severe contraction of deposits, while demands for assistance from the banks had forced advances to the record total of £54.383,000 exceeding deposits by £3,000,000. Instead the normal relief in the nrst quarter of last year, the March returns disclosed a situation of still greater stringency, and tho improvement in ithe second quarter was very slight. Substantial progress toward , a sounder posit/ion is portrayed by the retuVns for the last half of the year. Partly by a slight increase in deposits, but chiefly by a rapid reduction of advances, the excess of the latter has been reduced to only £236,000, which would, in normal circumstances, be regarded as exceptionally small for the close of the year. But while the net reduction of advances since. March has exceeded £3,000,000, the shrinkage of deposits has been less than £500,000. , The disparity is manifestly inconsistent with the facile theories, which have lately been put into circulation, by which banks are made responsible for the depression upon the assumption that deposits and advances expand and contract at the sole discretion of the bankers. The movement during the year actually comprises a decline in free deposits of over £2,000,000 and an increase in fixed deposits of £1,700,000, so that the former now amount; to

just over £16,000,000, while the fixed deposits, by a movement that has continued for five years, have risen to the new record of £34,635,000. The persistence of that expansion during the period of the depression —by which £4,000,000 have been added to fixed deposits in two years —exposes th<» fallacy of the argument Uiafc dopression might be relieved by the injection of additional credit. Few people raise loans from their bankers merely to place the proceeds on fixed deposit. The true meaning of the figures is that conditions have caused an enormous liquidation of private resources which have been made available by deposit with the banks for the financing of the demands for accommodation which have come from other directions. Lack of confidence, the stifling of enterprise and the stagnation of commerce have led to the mobilisation of resources in the hands of those most competent to employ them soundly in the process of adjustment to a new economic condition. It is perhaps too soon for the general public to realise how greatly the banks have assisted the Dominion to sustain the shock of a catastrophic depression, but as recovery proceeds, there will be increasing appreciation that one of the most potent factors in the maintenance of stability has been the strength of the country's banking institutions, and the prudence and sympathy with which they have administered their trust.