Bank Amalgamation.

Oamaru Mail, Volume XIX, Issue 6049, 14 September 1894, Page 3

Bank Amalgamation.

; OFFICIAL STATEMENT BY THE TREASURER. (bt telegraph ) (FROM OCR OWN CORRESPONDENT.) s Wellington, September 14. a As an imperfect and unauthorised outline has been telegraphed of the proposals j for the amalgamation of the Bank of New Zealand and the Colonial Bank, I waited £ upon the Colonial Treasurer this morning, j and he courteously consented to the immediate..publication of the memorandum sent by the Bank to the Governj ment. Mr Ward, in laying the proposal upon the table of the House this afternoon, stated that lest a wroDg impression should be formed by the publication of an incorrect statement of the facts, the r Government had decided to at once place the information before the House and the I country. The matter was, he said, under ; the consideration of the Government, 1 and no decision would be arrived at with i reference to it for some days. The - proposal reads as follows : | 1. Negotiations have taken place for | the amalgamation of the Bank of New : Zealand and the Colonial Bank of New Zealand, and the conditions have been provisionally defined. These are em- : bodied in the accompanying memorandum, '■ and are now respectfully submitted for the sanction of the Government, as a necessary preliminary to their being laid before the shareholders of the respective Banks for their confirmation. 2. It is confidently claimed that this ' arrangement, if carried into effect, will greatly contribute to the soundness and stability of banking in the colony, and by reason of the materially increased net profits which will accrue to the Bank of New Zealand from the accession of the [ Colonial Bank's business, it would i strengthen the security of the State in respect of its guarantee for the Bank of New Zealand. 3. The presence on the Bank of New Zealand's balance-sheet of a large item , representing shares in the Bank of New Zealand Estates Company is a source of weakness to the Bank, and the Colonial | Bank reasonably make it a condition of amalgamation either that it be entirely j removed or that the Government undertake to make good the ultimate deficiency, if any, which might remain after liquidation of the assets and of the collateral cover held by the Government, viz. : (a) the paid up capital of the Bank, which . under the proposed agreement is to be • written down to L 600,000; (b) the reserve liability of the shareholders— L 1.500,000 ; (c) the interest in the Bank of New Zealand shareholders in the future profits of the Bank, which, if the amalgamation be carrird out, can hardly fail in ten years to accumulate to L 500.000, say ; L 2.600.000. 4. This undertaking in point of fact . already exists, because the two millions c, pital guaranteed by the State is liable to the creditors, to make <rood this item, with the others in the balance-sheet. The complete separation of the Estates Company from the Bank, and the assumption by the Government of a share in its ! management and liquidation, would be a ' measure wise in itself, and one which the ■ country desires to see carried out. o. It is respectfully suggested that a ' small Board or Commission be set up, ■ half to be nominated by the Government and half by the Bank, with an administrative head to be jointly appointed. 6. And it is submitted that in order to r promote economy, and thereby the better ■ security of the State, arrangements be ■ made for the redemption of the , LI 500,000 —SA per cent, debentures, which are now a first charge on the ! assets, which impose a heavy and quite ; unnecessary burden of interest, and so lessen the resource! to which the colony has to look for the protection of its guarantee, : and which stand in the way of a satisfac- : tory rearrangement of the administration, ft is believed that this can be effected v-ithout ra'sing any more money by loan, • f part of the money already raised be used for extinguishing so much of these debentures. There will, on the contrary, be an actual reduction in the amount owing, but this means, by the resumption of some of the estates under the Land for Settlement Act, and by assistance from the Bank itself, the incubus referred to can 'oe got rid of. John Murray, Wellington, 11th September, 1894. The undersigned being of opinion that r an amalgamation between the Bank of . New Zealand and the Colonial Bank of NeT Zealand would be mutually advantageous, and in the interests of the colony, agree as regards the Bank of New Zealand to recommend to the approval of the Government, and as regards both banks I to recomnjend to their respective directors I and shareholders the following terms i' 1. The asseti of each bank to be reI viewed by a board or other tribunal, upon / which the other bank's representatives shall be preponderant. Upon these boards respectively being satisfied that the assets of each bank are so far sound ; that any deficiency c.n be made good by ; the provisions available therefor, the j Bank of New Ze.Jand to assume tjie . liabilities of the Colonial Bank and take over its assets, as hereinafter provided. | 2. The Bank of New Zealand to take the necessary measures to increase its : capital by the creation of new Bhares of the nominal value of L 1,000,000 sterling I to be designated B shares. Of these, ■ L400.0C0 to be issued to the shareholders of the Colonial Bank in lieu of, and exchange for, the present paid-up capital of that Bank, the shares so issued to be considered as fully paid-up shares, and to carryno further liability whatever; remain- • ing"L6OO,OOD in shares to be vested in the *, President of the Bank for the time being, ji and to be held for the present as unissued, but t.o be at the disposal of the share- ! holders of the Bank of New Zealand or their transferees, at a period to be appointed by the directors of the Bank for the time being, but not later than ' the end of the year 1903. The subscriptions to be pro rata to the hold--1 in<*s of the C shares hereinafter meni tioned, and six months to be given to ' subscribers in which to pay for the shares ! by instalments. When all the instalments 3re paid, the shares to carry no further : liability. Such of those shares as are not 1 subscribed for by those having a right to do so shall thereafter be absolutely the property of the Bank as then constituted, ' and free from any restriction as to issue. The Bank or New Zealand to write down its present paid-up capital of L 900.000 to L 600.000, the sum of L 300,000 so released to be used as hereinafter provided. The old shares so written down to be designated C shares. The capital of the Bank after amalgamation thus to be :—Guaranteed preference stock—A, i L 2.000.000; B shares fully paid up,. ! L 400.000 ; C shares fully paid up, I' L 600,000; total, L 3.000.000. B shares, un--1 issued, L 600,000; grand total, L 3,600,000. | 3. The first Board of Directors shall i consist of seven members, of whom four . shall be elected by the present shareholders of the Bank of New Zealand, and ' three shall be elected by the present ! shareholders of the Colonial Bank, or | their respective transferees It is of the essence of this agreement that the Bank of New Zealand shall have a preponderance of one member on the new board of directors; therefore, if the 4 Government should appoint a president, I) he shall stand for one of the directors to -be nominated by fchat'Bank. 4. With the exception of the principal ; executive officers namely, the jointI ; general managers, chief inspector, and 'London manager, regarding which a 'separate agreement has been entered into —the ojlcers of the B*nfc ■hall be i

selected by the new board of directors from the present staffs of both Banks, and appointed to their various posts. The selections, so far as may be practicable, shall be made in accordance with the numbers and positions of the present officers of the two present relatively, departure from this condition being only made where deemed necessary in the interest of the Bank. The Colonial Bank officers coming in shall have no right in the present Bank of New Zealand Guarantee and Provident Fund. The - officers dispensed with are to be compensated by the Bank to which they at present belong. 5. The liabilities and assets of the Colonial Bank shall be taken over by the Bank of New Zealand, as provided in clause 1, excepting such assets or advance business which by the new Board of Directors (having a preponderating number elected by the Bank of New Zealand) shall be considered unfit and not proper to be so taken ; such amounts as may be so rejected, but which it may not be thought expedient to wind-up, or not to wind-up speedily, also such amounts as are determined to be subjected to speedy realisation, shall be liquidated or otherwise treated bv the Bank under the new board, for the behoof of the'present shareholders of the Colonial Bank or their transferees, but, under the direction, and according to the wishes of the appointees of the said shareholders. The reserve funds and undivided profits of the Colonial Bank shall be used, in the first instance, to make good auy deficiency resulting from liquida tion as above. If any surplus remain after making good such a deficiency, such surplus shall be divided equitably amongst the shareholders of the Colonial Bank. If the reserve fund and profits be insufficient to make good the deficiency, then a call shall be struck on the Colonial Bank shares and shall go to make good such deficiency before the final exemption of the shareholders from liability. The limit of time allowed for acceptance or rejection of advance business as above shall be four calendar months from the date of amalgamation, and no such account shall be carried on for more than 12 months, unless with the deposit of a reserve against it to the satisfaction of the Board.

6. The new Board of Directors shall pass in like review the assets and liabilities of the Bank of New Zealand in existence prior to amalgamation, but if any representative of the Colonial Bank on the Board shall take exception to any assets so reviewed, then the tribunal must be narrowed by so many of the representatives of the Bank of New Zealand withdrawing as shall leave a preponderating number of Colonial Bank appointees to decide whether such asset shall be t.iken over or rejected. Within four months from date of amalgamation there shall be set aside for liquidation, or other treatment, all such assets and accounts as may be considered unfit and not proper to be continued as business of the B«ik. Such accounts as may be so set aside shall be liquidated, or otherwise treated by the new Board, m the same manner as those of the Colonial Bank, but under the direction and according to the wishes of the appointees of the present shareholders of the Bank of New Zealand. The L 300,000 released from the capital of the Bank, as per clause 2, the reserve funds, and the indiyidual profits of the of New Zealand shall be used, in the first instance, to make good any deficiency resulting from liquidation as above. If any surplus remain after making good such deficiency, such surplus shall be credited to the account of the Bank of New Zealand Estates Company (Limited), with the Bank, if the said released capital, reserve fund, and undivided profits which shall accrue on the six hundred thousand pounds shares shall be used in the first instance to make good such deficiency, and shall be so applied until the deficiency be wiped off. ?. The present premises of both the Bank of New Zealand and the Colonial Bank to be valued by the new board on the basis that they are going concerns, and if these values be agreeable to the appointees of the relative Banks, then such values be adopted and the premises so agreed upon be tal?en over by the amalgamated Bank. If the appointees of either Bank disagree with any such revaluation of the new board, then the board and the appointees so disagreeing shall, in each case, appoint an umpire, whose valuation shall be final, but it shall be reserved for the appointees of each bank to decide whether the amount of any valuation should be accepted from the amalgamated bank, or that in preference any particular premises should be liquidated as specified in clauses 5 and 6 hereof. Should the valuation of the present premises of the Bank of New Zealand amount to a sum exceeding that at which the whole of the premises now stands in the books of the Bank, such surplus shall be'credited to the liquidation account for the ultimate behoof of the Bank of New Zealand Estates Company (Limited), as per clause 6, and any surplus in like manner arising by the valuation of the premises of the Colonial Bank shall be credited to the liquidation account mentioned in clause 5. If, instead of a surplus, there should arise a deficiency to either Bank on account of premises, such deficiency shall be treated, in the case of the Bank of New Zealand, as provided for deficiencies on other assets, in clause 6, and in the ease of the Colonial Bank, as likewise provided in clause 5. 8. It is an integral part of this agreement that before amalgamation takes place shall be passed by the Parliament of New Zealand by means of which the Bank of New Zealand Estates Company (Limited) will be entirely separated from the Bank, so that the present shareholders of the Colonial Bank, who are about to transfer their capital, and the future creditors of the Bank of New Zealand, may run no risk whatever from the Bank's connection with the said Estates Company, or future advances to it. 9. It is hereby agreed that after payment of four per cent, per annum on the the guaranteed preference stock and six per cent, per annum dividend on the other paid up capital of the Bank, and after placing twenty thousand pounds per annum to a new reserve fund, all other profits and dividends earned and payable, after due provision for bad and doubtful debts, shall be applied to reduce the ultimate deficiency of the Bank of New Zealand Estates Company (Limited). 10. The Bank shall afford to the Bank of New Zealand Estates Company the necessary banking facilities, under suitable guarantee for carrying on and liquidating the business and assets of the Company and the concerns belonging to it. The amounts at credit of the Company with the Bank are to be placed for interest purposes against amounts at debit, and interest at the rate of four per cent per annum is to be charged or allowed on the daily balances, on either side, until the Company shall be either liquidated or placed in a solvent condition. 11. The said amalgamation shall take effect within 14 days after the shareholders of the respective Banks shall have adopted a resolution approving of such amalgamation, but the parties may, by mutual consent, extend such period of 14 days for a further period not exceeding two months. Dated at Wellington the 11th day of September, 1£94. ■ John Mtjkeat. M'Lean.