BANK INQUIRY.

Otago Daily Times, Issue 10598, 16 September 1896, Page 4

BANK INQUIRY.

(Per Unites Press Association.)

~ Wellington, September 15. The House Banking Committee resumed its sittings at 10.30 a.m.

j The examination of Mr Butt by the Premier I was continued. Witness F»id he did not know ' tbe motives that actuated the London Board in i inakiug the purchase of tha MaUmata estate. Tbe amount paid by the b»nk for oue-half share in the estate was £81,649, while the property tax valuation for the whole estate w»s £53,000. Mr Foster had now valued the estate, ! and his valuation, based on the earnI iags, waß about £150,000, so that apparently about £5000 above the value was paid for the bulk's share in the estate. Thi« transaction was placed before the committee in 1895, and witness thought that was sufficient, and consequently did not make «ny report to the Government on the matter. No protest had been made in regard to the transaction gincs witness had been Government auditor. Witness considered the goodwill of the Colonial Bank was worth £75,000, and the Bank of New Zealand had made a fair bargain. Ho thought sufficient cover had been made for accounts in the "B" list, and that they would come out very close to r thei;styn,ate., Hs.wo.uld not be surprised to tee the amount under £1000 on either side. No notice had been given to any of the persons whose accounts weie in the "A," "B," "C," or "D" lists, and in the way they were now situated they were very much at the mercy of the liquidators. Regarding his (witness's) appointment es auditor and the agreement he had obtained from the directors providing for his reinstatement in the bank in case ha lost his position as auditor, he would like to explain his positioD. It was first suggested to him by Mr John Murray that if an offer was made to him he should take the position of auditor. He (witness,) pointed out that he held a good position in the bank, and wan getting within measurable distance of the pension fund, and to get himself deprived of that wonld be a serious matter. Mr Murray pointed out, on the other hand, that witness's appointment would probably save the bank expense; that from hia acquaintance with the working of the bank he would be in a position to discharge the duties well. Eventually ho came to the conclusion that he might be of service in that - way. Then, when the offer w»s made ha consulted the directors of the bank, and said that he was prepared to accept it if some means could be devised by which lie would not forfeit his position in the bank. The directors agreed to give him an understanding that iE he lost his position as auditor from any other cause than misconduct ha would be readmitted to the bank. When Mr Watson stated bis intention of obtaining sn agreement as to tbe payment of his salary wituesß, feeling that ho was in a similar position to M r W.itK>n, was advised .to obtsin a similar agr<-< m-.ut, and in this was also embodied the uudecstmiding agreed upon at tha time. It did not occur to him that there was anything.wrong in this, nor did he now admit it. It did not seem to him that such an agreement would h&mpsr him in his position as auditor. When he was taxed with obtaining | the agreement, he saw then that he should cerI tainly have to!d the Government that he accepied tbe office under these conditions. In not doing so he saw,that ha had placed himself in a false position. He had immediately eaid that he was willing to place himself in the hands of the Government in the matter, and this he had done. Witness did not think that arrangements made by the board of directors with regard to its officers was a matter which it was necessary to report to the Government. Of course if any outrageous agreement were made witness would consider it bis duty to refer the matter to the Government, but he did not think it ncces-ary to do so in the c&eo of an ordinary, agreement. If witness saw that the effect of an agreement was that the officer was not doing his duty properly he wonld immediately communicate with the Government. Witness considered 33r Henry, Mackenzie was an extremely careful asr) osutious m*n, and one who devoted niiceasip.g »t-cit'O!! (o t;is dntie?, but he !iad not been long enough iv the position of general manager of the Bank of New Zealand to prove his worth. His time had been very much taken up in obtaining a grajp of the business of the institution, and consequently he had not bad an opportunity of showing wh&thsr ha possessed the high qualifications necessary for the successful management, of a large institution like the B»nk of New Zealand. Witness was in a bet.'ee position to judge of Mr Mackenzie's capabilities than Mr Booth was. It was premature to give such a decided opinion as Mr Booth had expressed' concerning Mr Mackenzie. He did not know how far Mr jJackeDZie was responsible for the state which thn Colonial Bank's Accounts were found to be in. He could only speak as to tbe care and cauciou displayed by Mr Mackebzie iv hia management of the Bank of NewZeilsud. Of course Eome responsibility attached to the general manager for the stuts of the Colonial Bank accounts, and the same remark would apply to the Bank of New Zealand accounts ; because all tbe higher officers of an institution were mote or less responsible in this regard. Witness thought that under ordinary circumstances one colonial auditor would bs sufficient to do justice boh to the bunk and the colony, but since he had taken the office the demands on his time had been exceptionally heavy, and he had beea uuable to visit other parti oi New Zealand in.the iaterests of the bank. The balance of the contingency fund would, he thought, be sufficient to meet future losses.

The Premier: Do yoa think tlie position of the bank is secure ?

Witness : That is my opiaioa. The Premier : With careful management, you think there will be no loss to the colony ?

Witness ; That U to, in my opinion. Continuing, witness stated that; he thought that the different parts of the colony were represented on tha directorate as far as they could be with advantage. If they could get capable men with the necessary knowledge of the four chief centres of the coloDy, residents in Wellington, it would be an advantage to have them on the directorate. Local knowledge was an advantage in dealing with some matters that came before ths director. Witness in the main agreed with the previous witnesses that the windiug up of the Colonial Bank affairs in the present form was not to the beat advantage of tile shareholders of the institution.

To Mr Moutgomsry: In 1888 the deficiency of the bink was £800,000 and the subscribed capital £1,000,000.

Mr Montgomery asked if under these circumstances ami under the deed of settlement ought not the bank t,o have gone into liquidation ? The Hon. J. M'KeDzie : I wisii to goodness ith»d.

Witness pointed oat that there was a reserve fund of £500,000 oat of which the writing off could be made, «nd that the directors at that time did not consider that half the subscribsd capital had been lost. Witness suggested that a form of balance sheet should be devised for adoption by all the banks trading in the colony. The objection he saw to the appointment: of assistant auditor was the question of divided responsibility and authority which he for one would be glad to avoid. He was not prepared to aay, however, that it would not he an advantage to appoint a permanent locum tenens, who could step into witness's pl»c>?. Wiiness'o cpiuiou was the Jess the haad of the Government eppe&ied in the B*nk of New Zealand the better would be its chances of success. The management of the bank should be kapt aloof from the Government as much as possible. All members of the Government had been exceedingly circumspect in their dealings with the Bank of .Naw Zealand. There bad been no interference and no suggestion on the part of the" Government, all the members of which had been most careful to avoid any appearance of intsrference wifch the b&nk. Witness himself had also, been careful of his conduct, and had designedly avoided the Government, so that the public would not be led to b?lieva that the Government controlled the mui'g'sinent of the bank or kuew more about the management than they should have done.. Witness would .no.t..goi,ap far,as u Jlr Macartby in saying that the separation of Messrs Watson and Mackenzie, as officers of the bank, was desirable. He did not care to express any opinion concerning them, owing to the fact that in the past he had been in business rivalry with both t'uese gentlemen. Hb thought, however, Mr Watson did influence Mr Msickeazie to • a certain extant. Witness did not think it would be wise for the Bank of New Zealand to take over the account? in the "B" list with thoir preoent cover, although possibly the cover v?ould be found to be sufficient. It would not be judicious,; however, to tsiko the risk. The business of the Bank of New Zealand was now being carried on on safe Jin's*;. In reply to Mr Hutchison, Witness said that he would ascertain the exact date on which he had first asked to ascertain the position of the Colonial Bink. ■

In reply to Mr Maslin, Witness said the not earnings of the bank, after making provision for bad debts, last year wan £100,000. He would look up the figures. Under examination by Mr Guinness, Witness eaid the original contribution by the Bank of New Zealand towards its employees' pension fund was £25,000. No annual contribution was now ina'de by the bank. The term of service necessary before advantage could be taken of the fund by any officer of the bank was 15 years. After 15 years' service if »n officer became disabled by sickness he could draw his pension, orjif in the opinion of the directors at the age'of 55 he was not fitted to longer continue in the service of the bank, or on reaching the age of 60, when he could retire of his own accord. If an employee lost his position, although it might nob be through any fault of his own, he forfeited all right to draw from the pension fund. Witness did not think this was unfair, as the fund contained a sort of Tontine principle; without it it would not be a success. (■ The object of the pension fond was to tie officers to the bank, and keep them in.its set vies for, life.

In reply to Mr T*nner, witness eaid that, allowing for human error, ho thought most of the balance sheets he had ha 4to deal with, or bad come across,; made an honest Attempt to put the position fairly and squarely. • At 1 p.m. the committeo adjourned till 10.30 ».m. to-morrow. ......■ . ■;