BANKS' GOLD RESERVES
A crucial question regarding the stocks of gold held by the commercial banks in New Zealand must be decided before the Government can proceed with its projected central banking legislation. The value of this gold is expressed in balancesheets and other official returns at par; the total of £5,500,000 would be worth £8,000,000 in London at present quotations. It is assumed that upon the establishment of a central bank, all the gold held by the banks would be transferred to the now institution—according to Sir Otto Niemcyer's draft legislation "in exchange for reserve bank notes or for credit at the reserve bank." To-djiy gold is at a premium of about GO per cent in New Zealand currency, and the banks cannot be expected to submit without question to a requisition of their property unless full consideration is given to the increment in its value. It is unlikely that the central bank would retain the whole stock of gold in Now Zealand. It is far larger than necessary, and if Sir Otto Niemcyer's advice is followed, gold will form only part of the central bank's reserves. The situation is manifestly tempting to the Government. Longstanding regulations prevent the export of this gold by the banks, so that they cannot realise the profit offered by its conversion into sterling funds. The Government might argue that, in these circumstances, the banks have no claim to the potential premium; that the pro-
jectcd ceDtral bank ought to be given power to acquire the gold at par, dispose of the surplus, retain part of the profit for the reserve fund of £1,000,000 which Sir Otto Nicmeyer proposed should be furnished by the Government and again with the sanction of legislation, deliver the rest of the profit to the Government. The sophistry of such a proposition is apparent; it cannot be pressed without complete disregard of equitable considerations. On the other hand, it is doubtful whether the banks can legitimately claim the full market value of gold accumulated by them as a condition of their enjoyment of a valuable privilege, especially as the realisation of any part of the profit is absolutely contingent upon extensive changes in the existing banking law. Nevertheless, unless the banks make a voluntary surrender of their right to the profits from the sale of redundant stocks it would seem that the only solution of the problem is by way of an amicable settlement, not by exploitation of the Government's power to determine it by legislation.
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New Zealand Herald, Volume LXIX, Issue 21358, 6 December 1932, Page 8
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417BANKS' GOLD RESERVES New Zealand Herald, Volume LXIX, Issue 21358, 6 December 1932, Page 8
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