THE OTAGO DAILY TIMES FRIDAY, NOVEMBER 3, 1933. THE RESERVE BANK BILL

Otago Daily Times, Issue 22101, 3 November 1933, Page 8

THE OTAGO DAILY TIMES FRIDAY, NOVEMBER 3, 1933. THE RESERVE BANK BILL

It seems most probable that the Reserve Bank Bill will be passed without having undergone any amendment other than such as will have been conceded by the Government. The question whether a Reserve Bank is necessary in a country that, like New Zealand, is only partially developed and not largely populated is one which has exercised the minds of a great many members of the community. It is a perfectly reasonable doubt which they have expressed. The support, however, which has been given in the United Kingdom to the proposal to institute a Reserve Bank cannot have failed to impress them. A Central Bank has been said in The Times to be “ everywhere recognised as the symbol of financial maturity,” and the same authority has described it as having, from the business point of view, “ the undeniable advantage of centralising the cash resources of a country in such a way as to render them most easily available in time of need.” The House of Representatives has, by accepting the principle of central banking, decided that any doubts respecting the necessity or advisability of the establishment of a Central Bank in the Dominion are groundless. This being so, it is manifestly in the public interest that the constitution of the bank should be so devised as to conform to the pattern which the experience of central banking has elsewhere shown to be desirable. The Bill which is now before Parliament provides in most respects for the establishment of the bank upon lines that are recognised as sound. The advice of Sir Otto Niemeyer two years ago, that a Central Bank should be established in New Zealand, was subject to two fundamental conditions. One was that the bank must be entirely free from both the actual fact and the fear of political interference. The other was that, in order that the bank may effectively discharge its functions in regulating the credit conditions of the country, it should hold both the banking balances of the Government and the reserve balances of the trading banks. The latter condition is covered by provision in the Reserve Bank Bill. The former condition is less satisfactorily covered. ( The Bill provides that the capital of the Bank, which shall be £500,000, shall be subscribed by the public, but that the Government, which is to pay £1,000,000 into the Bank’s reserve fund, shall not only appoint the Governor, Deputy Governor, and three directors as representatives of the State, but shall also in the first instance appoint the four shareholders’ representatives. It is also provided that the first of the shareholders’ directors to retire shall retain office until June 30, 1936, after which one shall retire annually. Upon the personnel of the first board of directors heavy responsibilities will be placed. Among other things, it will be faced with the problem of exchange policy. One of the critics of the Bill in Parliament has expressed a view that has

frequently been heard in the street, that the Government proposes to utilise the Reserve Bank as a convenient instrument by which it may escape from its liability in the form ol* the surplus exchange that is held by it in London. But this will simply mean that the Reserve Bank will begin its career under a burden of formidable dimensions. The importance of its business being directed by a strong board, unamenable to political influence, is sufficiently obvious.