CENTRAL RESERVE BANK

New Zealand Herald, Volume LXIX, Issue 21328, 1 November 1932, Page 13

CENTRAL RESERVE BANK

Sir, —It appears that a Reserve Bank will shortly bo an accomplished fact. I read carefully the Niemeyer proposals published in your issue of October 21. As the article says, the conception of a Central Bank :is an unfamiliar one here. I have had a little banking experience, and after taking into consideration that we have not our own currency, like some other parts of the British Empire, I cannot see where we are to obtain any advantage by its establishment. The note issue, unless under most rigid supervision, may become dangerous. The question of whether it, will be of assistance to the trading banks is remote, for the reason that wo have only one controlled locally, tho other five being controlled abroad. It suggests itself to me that should any oi the six institutions require to supplement their funds, it would bo done abroad, where rates are invariably much lower than we could ever obtain in New Zealand. The establishment of a new bank is usually popular with a certain section of the public, as they think it means more money, which is a fallacy. The proposals suggest that the bank be established with capital to bo subscribed by the public, presumably as an investment, if so from whence will tho shareholders hope to receive dividends? No doubt from the profits derived from tho note issue, and in that case what is going to compensate the Government for the loss of the present note tax ? This is one question on which I, as a taxpayer, would appreciate enlightenment. Another is what is the estimated overhead of the bank ? No doubt some of the economists who fa\oui the proposal could give answers to the foregoing. Before the bank is established, the trading banks should be approached with a view to ascertaining what support will be accorded tho new venture. [ certainly think that we are well and truly getting ahead of ourselves. This country has done so in other diiections, and we are to-day "paying the piper." Look Before You Leap.