BANKING IN NEW ZEALAND.

Otago Daily Times, Issue 20500, 30 August 1928, Page 3

BANKING IN NEW ZEALAND.

AN HISTORICAL SURVEY

Written for the Otago Daily Times,

Bv 0. G. M

11. BANK OF OTAGO

Among the financial institutions of the past that “ had their day and ceased to be” it is fitting that reference should be made to the Bank of Otago, which owed its origin to the rich discoveries of gold that were made in the interior of the province. Inspired by the tales of an El Dorado of the Southern Seas, a group of financiers registered a company in London, and during the 1863 session of the New Zealand Parliament legislative authority for the intitiation of the epteiprise was obtained by means of a private Bill. Towards the end of the year Mr John Bathgate, father of Mr Alexander Bathgate, one of our best-known citizens, arrived in the colony to assume the duties of first manager of the Bank of Otago, and so energetically did he advance the practical side of the project that, on December 8, 1863. the new bank opened its doors to the public in premises in Princes street, where the National Bank now stands. The head office was, of course, in London, hut Mr Bathgate had been furnished by his principals with full authority to carry on the business in accordance with the conditions then prevailing in New Zealand. . Though bearing a provincial title, the Bank of Otago was by no means a purely local institution, for in those days—as is the case to-day—Dunedin had financial interests in all parts of the colony, and the young bank soon acquired connections in many distant parts of the country. Under the direction *f Mr John Bathgate, branches were quickly established on the goldfields—at Harailtons, Queenstown, and Clutha Ferry—and also at Port Chalmers and Invercargill. Mr Alexander Bathgate, then only about 18 years of age, was a clerk in the service of the bank, and in 1866, when he was stationed at Hamiltons, that township was enjoying an era of prosperity based on the rich finds of gold in the surrounding districts, and boasted four hotels, as well as several stores at which liquor was openly sold over the counter. Clutha Ferry, whore one of the early branches of the bank was situated, is the present site of Balclutha, and owed its earlier name to the circumstance that the Molyneux was then crossed by means of a ferry attached to a wife rope instead of by the bridge that now spans the river. The Queenstown branch was opened early in 1804 in a handsome wooden building, which at that time afforded a striking contrast with the more primitive structures that surrounded it. It was, indeed, one of the finest ami most substantial buildings on the goldfields, and was regarded as an outstanding architectural achievement of its day and generation. . . . . In the early ’sixties the Provincial Government of Southland embarked on a progressive policy by constructing railways and undertaking other public works, the cost of which was to be provided by means of a loan, and an-ar-rangement was made with the Bank of Otago, which had opened a branch in Invercargill. to take over the Governments account from the Bank of New South Wales and allow a further overdraft which was not to exceed a limited amount each month. This arrangement, however, was disregarded, and the Government drawings were very largely increased. The result was that a difficult situation was created for the bank, and when the large number of bankruptcies that marked the reaction after the boom period occurred its operations were seriously hampered in many ways. These troubles led to the withdrawal from the position of manager of Mr Bathgate, and, in 1873, the Bank of Otago was absorbed by the National Bank under the managership of Mr W. J. M. Larnach. Mr Alexander Bathgate retains a very lively recollection of the early days of the bank. The first building in whicn business was transacted was a stone structure in Princes street, on the present site of the National Bank. The buildings had been erected by the grocery firm of Messrs Jones and Williamson, and when it was converted into a bank residential quarters were provided above the offices, and here several of the clerks took up their abode. The bank had not long beeii in business when, one night, a five broke out in a wooden hotel, separated from the building by a narrow right-of-way. overlooked by one of the banks windows. When Mr Bathgate and his father arrived on the scene from their home in The Glen the flames were attacking the bank through this and, despite the valiant efforts of the Volunteer Fire Brigade, both buildings were completely destroyed, only the stone walls of the bank being left standing. The safe, which stood in the manager s room, dropped to the ground when the floor gave way, and, after it had been cooled down by the application of the firemen’s hoses, it was opened, and the contents were found to be intact. Though the books were undamaged, their passage through the inferno had resulted in the complete obliteration of the blue lines with which they were ruled. The parchment deeds and securities emerged rather damp and moist, and, in the process of drying out, they shrank and became so brittle that they had to be affixed to other sheets in order to keep them intact. On the night of the fire premises inimetlfatly opposite, which were formerly used as an auction room, were leased/ and at 10 o’clock next morning the doors of the improvised bank Were thrown open for (he transaction of “business as usual” — a rather remarkable performance, and one that could scarcely be paralleled nowadays owing to the complexities of modern business. Within a comparatively short space of time a new bank was erected within the four walls that had defied the ravages of the fire, and simultaneously the site of the former hotel, upon which a new structure had also been erected, was acquired, together with a brick building known as Temrde Chambers, and tliose were used for letting as offices. It may be added that the fire which is recorded above was responsible for the ■destruction of a number of buildings in the block from the site of the bank to Dowling street, including First Church. NEW ZEALAND BANKING CORPORATION.

The career of the New Zealand Banking Corporation was of brief duration. This institution was a rival to the Bank of Otago, and in a race to New Zealand between the vessels conveying Mr John Bathgate and Mr J. Reid Mackenzie, the respective managers, Mr Bathgate was the first to reach his objective. Owing to the similarity of its name to that of the Bank of New Zealand, the Banking Corporation changed its designation to the Commercial Bank of New Zealand, and some two months after the Bank of Otago had started, namely, on February 12, 1864, it opened its doors in premises in Manse street, next to Wain’s Hotel. Tho Commercial Bank carried on for about throe years and then a run took place, with the result that in 1866 its suspended payment.

THE NATIONAL BANK. The National Bank of New .-Zealand was registered in England in 1872, the original prospectus being issued in London an August 15 of that year. By a special Act of Parliament it was incorporated in New Zealand in the following year, and Mr Adam Burnes, who arrived from the Old Country as the first inspector and general manager, at once made arrangements for commencing business. The headquarters of the bank were established in Wellington, and branches were opened there and also in Auckland, Christchurch, and Dunedin, these latter being taken over from the Bank o.f Otago. In 1881 the head office was transferred from Wellington to Dunedin on tl.j appointment as inspector of Mr M illiain Dymock, who later became general manager. The headquarters of the bank was removed back to Wellington in 18114 by Mr (afterwards Sir James) Coates, when he took up his duties an general manager. The post-war expansion of the bank’s business has been remarkably vigorous, and during 1920 an opportunity was afforded of gauging its internal strength, because during that year Lloyd’s Bank (London) took up 50,000 shares, and so acquired an eighth interest in the bank. The National Bank has always been r. purely New Zealand banking institution, and throughout its history it hay been intimately connected with many torn),: of commercial enterprise, including mining, dairying, and the kauri gum industry. In the main it has assisted and encouraged

the small traders and farmers than the large merchants and squatters and, notwithstanding the unsettled financial conditions that prevailed sprue 30 years ago, during which reductions ot capital were considered desirable, the bank has held its own and prospered. Mr W. J. M. Larnach, the first Dunedin manager of the bank, was one of tin’ founders of Guthrie and Larnach, a firm which owned its.own bush sawmills and the fleet of vessels used for the conveyance of the timber to Dunedin. He was the builder of “ Larnach’s Oastle ” on the Peninsula.

/ THE COLONIAL BANK.

The ill-fated Colonial Bank afforded an illustration of the fact that ‘ all is not gold that glitters.” Founded in 18/4, the year before the formation of the Union Steam Ship Company, it passed out of existence at the end of 21 years, whereas the shipping company, with its familiar red funnel cargo steamers am, modern passenger liners, continues to be an important factor in the coastal and overseas trade of the Dominion.’ On September 30, 1874, Mr W. J. M. Larnach presided over a meeting of the directors and auditors of the Colonial Bank, which was held in the Masonic Hall in Moray place, and on the following day public business was commenced hi the formei premises of the Union Bank in High street. The board of directors of tne new bank consisted of the Ho-n. M. Holmes (chairman), Messrs A. W. Morris. W. A. Tolmie, W. J. M. Larnach. John Reid (Merton), Donald Reid, and John Reid (Elderslie). The first manager was Mr L. O. Beal. On May 19. 1877, the bank acquired the Exchange Building in Princes street, and there it continued its operations until 1895, when difficulties, brought about by over-trad-ing, were encountered, and its business was acquired by the Bank of New Zealand—a transaction that did not meet with unmixed approval at the time. The meeting at which the agreement to sell the concern to the Bank of New Zealand was confirmed was held on November 3, 1895, and was presided over by Mr George M’Lean, then president of the bank. The absorption 'of the Colonial Bank was accompanied by some sensational features which had reverberations in the parliamentary debates of the time, and also in a memorable action in the Supreme Court before Mr Justice Williams. Speaking of the meeting at which the decision; to sell the concern to the Bank of New Zealand was confirmed, the Otago Daily Times, in an editorial whicu appeared two days later, said: “In many respects the proceedings at that meeting were unsatisfactory. They afford no adequate explanation of the position in which the bank is found to be; and no adequate explanation is forthcoming. If the explanations of the board have any validity they mean that the strengthening of the Bank of New Zealand by Government support is a vital blow to the other banks generally; but there is not a tittle of evidence to support such an inference. . . . This bank was founded over 20 years ago in order that we might have a purely colonial institution. It. almost throughout its career, paid satisfactory profits, but so far ns the ultimate results can be foreseen the history of the bank must prove a disappointing one.'’

COMMERCIAL BANK OF AUSTRALIA.

The Commercial Bank of Australia was established in 1860 under the Victorian Companies Act. It was reconstructed in 1893 and in February, 1918, it absorbed the National Bank of Tasmania. Extending its sphere of influence to the Dominion in 1912, branches were formed in that year at Wellington and Auckland; in 1913 at Christchurch; and in 1914 at Dunedin. The Dunedin branch was at first housed in temporary premises in the Empire Buildings, at the corner of Princes street and Jetty street, and in March, 1922, the bank removed to itpresent permanent quarters in Dowling street. Mr R. E. B. Franklin was tin first Dunedin manager, and upon his resignation in 1949 Mr 8. Angel took charge of the the local operations of the bank. AN EARLY NOTE ISSUE.

Among the earliest records of banking in Otago—though not in New Zealand---was the issue of notes by Mr “Johnny Jones in competition with Mr JaneMacandrew, both of whom were Dune :1m merchants. The actual date of these rival notes issues is uncertain, but there is reliable authority for the belief that the notes made their appearance in tinearly ’fifties, for, when the Union Bank commenced business in Dunedin at the beginning of 1857 it was authorised by a proclamation in the Gazette to issue notes on its own behalf and to “ retire ” the notes issued by Mr Jones and Mr Macandrew. There may be seen in the Early Settlers’ Museum one of the actual notes issued by Mr Jones as well as the original copperplate from which the notes were printed.

The first portion of this article appeared in yesterday's issue. ■