DO BANKS GAMBLE?

New Zealand Times, Volume XXXI, Issue 6962, 30 October 1909, Page 5

DO BANKS GAMBLE?

ALLEGATIONS XN I'AULIAML'NT. BANK OF NEW ZEALAND'S METHOD. A DENIAL BY THE CHAIRMAN. Tn the House of Hepresentativcs on Wednesday, during the debate on tho Loan Mill, the following statement was made: Mr J. C. Thomson (Wallace), touching upon the question of banking, asked was it, or was it not, a fact that one leading bank in this Dominion had Bent Homo five millions of its depositors' money to gamble with on tho stock exchange. Was, or was not, that a fact? Mr W. Eraser (Wakatipu): You do not know what vou are talking about. Mr Thompson: I do know what I atu talking about. Tho institution in question sent Home five millions of its depositors' money for investment, became, it was "not satisfied with less than iivo or six per cent. Tho Government, through the. Advances to Settlers Department, had fixed tho standard at -1-i per cent., and that was not enough for the institution in question. Mr Harold BeaucUarap, chairman of directors of the- Bank of New Zealand, interviewed on tho subject by a "New Zealajid Times" reporter, said: — "Tho statement is perfectly ridiculous and quito contrary to fact. None of the banks doing business in the Dominion have deliberately transferred any portion of their funds to London for tho purpose of gambling on the stock exchange. It so happens that at certain seasons of the year, when large realisations of produce take place in London, that banks do accumulate substantial funds, but these are from time to time transferred, or re-transferred to tho Dominion in accordanco with the demands that arise for banking accommodation. In point of fact, this happened to a largo extent during tho late financial stringency, and had the banks not been in the position of at onco being able to get the funds from London to meet the demands then existing in the Dominion, that financial stringency would have been much more acute than it really was. Tho Bank of New Zealand was able at that time to draw something like two millions sterling from London to meet tho stringency. This is really a benefit derived through many banks making temporary investments of funds iu London and these funds aro more or less invested in liquid securities. "Tho Bank of New- Zealand and other banks trading in this Dominion from time to time raise funds on behalf of public bodies, and these, for a short or longer period, remain in London untal thev arc required in the Dominion. In London at all times investment can be found for money in liquid securities, but no bank, so far as I a.m aware, gambles on the stock exchange in the manner suggested by the member for Wallace. No attention would have been paid to his statement had it not emanated from a member of Parliament, who. presumably, ought to know something of the subject which ho is discussing. If such gambling as alleged took place the shareholders no doubt would be the first to make the most adverse criticism. No reputable board of directors, "however, would ever think of doing what the member for Wallace alleges.

BANK OP NEW ZEALAND SHARES. "I notice that Mr EU stated in the House that the preference shares held by the Crown in the Bank of New Zealand were bo-day worth dn the open market £9 ss. To that I would nay that these shares have never been offered in the open market, but even if tliey were they would command a very much larger sum than that mentioned by Mr Ell. As you know, these, preference shares are l'ullv paid up; that is to say, up to JX 13s id. On the basis of the last dividend declared by tho bank we returned to the Crown 10 per cent, .per annum. The shares referred to by Mr .EU as being sold in the open market, 'are the ordinary shares of the bank, paid up to .63 6s Bd, with liability in respect to uncalled capital of .£3 0s Bd. The shares acquired by the Crown for .£500,000 would to-day readilv command 100 per cent., that is .£1,000,000, if the Government were prepared to sell them. According to a return presented to Parliament, the amount paid annually by the Crown by way of interest on the purchase money 'of its shave* is .£18,113, and it gets in return .£13,750 per annum in dividends, based on last year's business, showing that it was a magnificent investment for the Crown. It' all Crow.n investments save an equally Rood result, there would be cause for much congratulation."