MODERN BANKING

New Zealand Herald, Volume LXXII, Issue 22223, 25 September 1935, Page 17

MODERN BANKING

Sir,—No bank, and no other borrower, is in the habit of transferring loans to other parties, nor would anyone be likely to accept any such obligation. The obligation incurred by banks to their depositors, like the obligations incurred by all other borrowers, must stand till the amounts have been returned to the lenders. The substance lent, however, can be rfilent, and deposits can, and constantly are, repaid with cash. Just as the arguments used by Mr. Fitzherbert are of a somewhat humorous type, so his friends must surely be distinctly "funny" if none of them regards his deposit as a loan to the bank. Do Mr. Fitzherbert's friends regard their deposits as gifts to banks, for surely a deposit must either be gift or loan. In the first of the articles you printed it was explained that our present excess of deposits is due chiefly to our excess, in recent years, of exports. Exporters have had their deposits increased by the sale to the banks of their export credits, and importers have not, by their purchases, increased their advances to the same extent. Thus the excess of deposits represents, not an accumulation of goods in our banks, but an accumulation of sterling in London. May I suggest to Mr. Fitzherbert that it would he useful to read an article before proceeding to criticise it? Manurewa. J. Johnstone.