BANKS' LONDON BALANCES

New Zealand Herald, Volume LXXI, Issue 21912, 22 September 1934, Page 10

BANKS' LONDON BALANCES

The new form of statement, showing the assets and liabilities of the six trading hanks, to be issued monthly in accordance with the Reserve Bank Act, has several interesting features. It shows the actual position at a given time, the close of business on the last Monday in the month. The quarterly statements issued hitherto gave the average of transactions under the various headings during the periqd reviewed. In addition, there are several features not included in the previous quarterly returns. Chief among these is a statement of the assets held in London on account of New Zealand business. Until now these figures have not been known. Indeed, the Treasury has stated recently that the four Australian banks were not able to give information on the subject, as they had not been accustomed to segregate their New Zealand business and did not know hov much of their London balance was the product o£ transactions from this country. Tne figures, now that they are available, show a substantial accumulation of sterling exchange in addition to that held by the Reserve Bank. The amount, valued in New Zealand currency, was £8,821,538 on July 30 and £11,171,987 on August 27, an increase of £2,350,499 in four weeks. On present appearances this figure is likely to increase still further. Unless the level of imports rises sufficiently to absorb the return from exports sold, there seems no course open to the bankß other than to invest the money in London. They have the option of Belling sterling exchange to the Reserve Bank. If they do, they will either be paid in notes, or have their deposits with the Reserve Bank increased by the amount of the transaction. The notes will be of no use once their trading requirements have )aeen filled. Their deposits with the Reserve Bank, on which they receive no interest, are already roughly five times the legal requirement. Obviously, therefore, it is better to invest the funds in London, accepting whatever interest is offering, than to bring them to this country, where the supply already far exceeds the effective demand. Consequently, further heavy accumulations of London assets—potential sterling exchanore —in the hands of the trading banks may be expected unless the trading position undergoes some drastic change of which there is, at present, not the slightest sign.