OLD BANK NOTES

New Zealand Herald, Volume LXXII, Issue 22004, 10 January 1935, Page 10

OLD BANK NOTES

USE AS LEGAL TENDER CESSATION TO-DAY VALUE STILL RETAINED PROVISION FOR REDEMPTION In accordance with legislation passed last year, banknotes formerly issued by the trading banks of New Zealand and still in circulation will to-day cease to be legal tender. However, this does not mean that holders of the banknotes of the old issues will find them valueless. People may refuse to accept such notes for payment, but the holder may have them exchanged for notes of the Reserve Bank at any branch of the issuing bank until August I', 1936, and thereafter at the Reserve Bank itself until August 1, 1976. Prior to the outbreak of war the banknotes issued by the trading banks in New Zealand were payable in gold, but on August 5, 1914, an Act was passed providing that all banknotes issued by the trading banks, subject to the usual provisions and restrictions, should be legal tender. The conditions dealt with the redemption of the notes in gold at the expiration of the period laid down and provision was also made for payment by the Treasury in the case of default by any bank. A proclamation by the Governor-General in Council immediately gave effect to the amendment and extensions were made from time to time to the period in which notes of the trading banks would be legal tender. Change in System The establishment of the Reserve Bank of New Zealand saw a change in the system of note issue. On August 1, 1934, Reserve Bank notes replaced those of the trading banks, which, since then, have been gradually called in and replaced by notes of the new issue. The amendments to the Banking Act which made the notes of the trading banks legal tender were repealed in the Finance Act (No. 3), 1931, the repeal to come into force on January 10, 1935. Long Term Provided The authority of the trading banks to issue notes ceased on August 1 last year. Under the Reserve Bank Act, 1933, the trading banks must pay over to the Reserve Bank on August 1, 1936, an amount equal to the value of their then outstanding notes, issued or payable in New Zealand, and their liability to the holders of any such notes will thereupon be assumed by the Reserve Bank. Thereafter, holders of trading bank notes will have an additional period of 40 years in which they may redeem them through the Reserve Bank, but after August 1, 1976, such notes that have not been presented for payment will be deemed not to b« in circulation and a sum equal to their value will be paid by the Reserve Bank into the Public Account to the credit of the Consolidated Fund. Majority Already Replaced

According to local bank officials, most of the old trading bank notes have already been replaced by the Reserve Bank issue. There is no exact method of finding out the total number outstanding, as losses through fire and other causes cannot be determined. It is thought that in some cases notes of the old issues may be hoarded by people so conservative as to think that only the notes of the bank they know have any real value. However, if they keep those notes'after August 1, 1976, they will succeed merely in making a present of their value to the Government. The value of the notes lost through any cause will also ultimately go to the Government.