THE RESERVE BANK

New Zealand Herald, Volume LXXI, Issue 21899, 7 September 1934, Page 10

THE RESERVE BANK

The Reserve Bank of New Zealand has now been in business for slightly more than one calendar month. The return gazetted last night means that its operations from August 1 to September 3 liave been covered by the five statements issued in accordance with its statutory obligations. Accordingly some idea can be formed of what has happened in the world of banking since the central institution entered it. The level of the note issue has remained stable. The bank notes item in the balancesheet was £182,082 higher at September 3 than at August. 6. This suggests that the trading banks calculated their requirements with considerable accuracy when they received their first consignments of the new notes. At the end of the first week their deposits with the Reserve Bank amounted to £14,536,523. The figure at the close of business on Monday last was £17,387,709. Most of the rise can be explained by reference to the next item in the Reserve Bank balance-sheet worth notice —the gold holding. This has increased from £259,312 on August 6 to £4,300,057 on September 3. The process of transferring the gold reserves of the trading banks to the Reserve Bank, as required by law, has made considerable progress. The banks were required to hand. over their gold in return for notes or for credit with the Reserve Bank. The gold holding has gone up by £4,040,745 in the month, yet the level of bankers' doposits has increased by only £2,851,186, with the note issue up by £182,082. However, the Reserve Bank received coined gold at its nominal value, and bullion at the rate of £3 17s an ounce. What it has obtained will certainly have been entered in its balance-sheet at a substantially higher figure than that, hence the apparent discrepancy is easily explained. Sterling exchange has remained practically stationary at approximately £24,500,000 for the month. The bank has not been called upon to meet its statutory obligation to buy and sell sterling on demand. There are various headings ill the return against which no figure yet stands. The reason is that in the absence of an organised money market and bill market in New Zealand, many of the functions with which the bank has been formally invested have not been performed; how far in the future lies the day when they will be exercised cannot at present be even guessed.