CENTRAL RESERVE BANK

New Zealand Herald, Volume LXIX, Issue 21342, 17 November 1932, Page 15

CENTRAL RESERVE BANK

Sir, —In your issue of to-day I am glad I to note the opinion of Mr. E. O'Sullivnn, ! general manager of the English, Scottish | and Australian Bank, that the establish- ! ment of a central reserve bank in New I Zealand would be of benefit to the connI try, but I must disagree with his idea of ' so establishing such a bank. On the ques- : tion of central banking New Zealand has nothing to learn from Australia, and it is quite wrong to suggest that the Commonwealth Bank of Australia is a properly constituted central reserve bank. The Commonwealth Bank is purely a Stute bank, and the instability of Australian currency to-day is sufficient evidence that the Commonwealth Hank is not functioning as a central, reserve bank. I also disagree with Mr. Q'Sullivan's suggestion that a central bank could be established in conjunction with the Bank of New Zealand. This suggestion has been made previously, and the reason given is that the Bank of England, a private banking corporation, acts as the central bank ill London for the other commercial banks. We have to remember, however, that when the Bank of England undertook the responsibilities of central banking in 1844, very little was known of the principles of central banking, but with the recent developments of the system, the best financial authorities in London recognise that the day is not far distant when the commercial side of the Bank of England shall be abandoned to the purely commercial banks, and the Bank of England will confine its activities entirely to central banking responsibilities. We therefore do not wish to do in New Zealand what they intend to undo in London, for it is only when the Bank of England takes thus step and /dissociates itself from its commercial work that it can function as an Imperial central bonk—an aim we all have in view—and maybe represent the British Empire in the Bank of International Settlements, or some such international bank. The greatest objection to what might be termed a "piebald" bank would be that the central bank of the country must be free from politic.il domination, and I would add that the politics of the country must bo free from the domination of the bank. I would like to warn readers that a central reserve bank can be one of two things—cither the greatest possible benefit to the country, or a very serious danger. This depends entirely on its constitution. I therefore trust New Zealand's central reserve bank will be a bank /reo from both monetary influence and political domination, having no dividends to earn and distribute, no party politics to serve, and no vested interests to heed. J. llislop.