RESERVE BANK

New Zealand Herald, Volume LXX, Issue 21640, 4 November 1933, Page 13

RESERVE BANK

HOUSE PASSES BILE

STATE CONTROL OF BOARD

IMPORTANCE OF AMENDMENT

[BT TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Friday The precise way in which the Minister of Finance, Mr. Coates, will fulfil his undertaking to the House to amend the Reserve Bill, which was passed early this morning, to provide for the appointment of the governor and deputy-governor of the bank being left as far as possible in the hands of the State, will not be known until the bill conies before the Legislative Council on Wednesday. It is anticipated, however, that the amendment which Mr. Coates made to the bill will stand, with the addition of a further provision tending to give the Governor-General-in-Council final authority to appoint the governor and deputy-governor. As finally approved by the House, the provision now is that at the end of the seven-year term of the first officers, the next appointments will be made by the Government on the recommendation of the board of directors, instead of by an election by the shareholders. It is anticipated that a further clause will be added to the effect that in the event of a disagreement between the Government and the board, the final authority to make the appointment will rest with the Government. This does not go quite as far as some members of the Government wished, but it will almost certainly be acceptable to them as a com prom isn Composition of Board If the appointment of these two officers rests with the State, the State will have a majority of directors 011 the board of the bank. The Governor-General-in-Council is already empowered to appoint three members of the board. His appgintmetft of the governor and deputy-governor increases the strength of the State's representation to five of the nine members of the board who are given the right to vote.

In addition, however, the State has a further representative in the Secretary to the Treasury, who is a member of the boaVd by virtue of his office, although he is denied a vote. It will be seen, therefore, that in order to qecure the passage of the bill in the face of determined opposition from a group of its own members, the Government has actually had to make a radical change in the constitution of the governing body of the bank. Influence of the Group

This group t>f members within the Coalition, which has been facetiously called "the study circle," has made its influence felt over the liescrve Bank Bill to the extent of enlisting the support of several other Government members. The original members of the group were Messrs. F. Lye, J. Hnrgest, W. J. Broadfoot, A. E. Ansell, A. E. Jul 1, and K. J. Holyoake, but on the banking measure, they had the support of at least four other Coalitionists. It is now an open secret that this group has been responsible not only for the modification . of the directorate along the lines of greater State influence, but also for the definite limitation of shareholding and its restriction to British subjects. It is expected that the Legislative Council will pass the bill in its amended form.

PROFITS ON GOLD

.ACQUISITION BY STATE

Mr. J. Hislop writes:—By a division of 56 to 5 the House of Representatives took the rightful possession of the gold reserve of New Zealand for the benefit of the State, and to remove any doubt from tly3 mind of the "man in the street" as to whether the House acted justly by the banks in this matter, the following information will, I feel sure, be useful to him: In 1928 the gold and silver holding of the Bank of France was revalued and the book profit amounting to 16,710f000,000 francs was totally credited to the State of France. In 1926, in Belgium, following a revaluation in that country, 1,824,000,000 francs were credited to the national account by the Reserve Bank of Belgium and went to liquidate the national debt to the bank. In 1927, in Italy, 4,227,000,000 lire was, for the same reason, credited to the Nation of Italy in liquidation of their debt. The same practice has been carried out on the establishment of central banks in Rumania, Bulgaria, and Finland.

In Greece, however, the position was different. On- the establishment of a new reserve bank in Greece, the policy was followed that the profits on the gold should be given to the banks. This was done and the people of Greece, having discovered that they had been had over the transaction, demanded of the Government that the whole matter should be investigated. Upon investigation, the commercial banks acknowledged the error and repaid a portion of the profits to the State, and the balance was used in the granting by the commercial banks of long term agricultural credits. I give this information to assure the man in the street that, as in the case of the centralising of our banking system, there is an abundance of international evidence and experience supporting the action of the Minister of Finance, the Rt. Hon. J. G. Coates. whereby he safeguards the interests of the people of New Zealand, while in no way acting unjustly toward the banks.