BANK OF NEW ZEALAND.

Opunake Times, Volume III, Issue 121, 30 August 1895, Page 3

BANK OF NEW ZEALAND.

THE SELECT COMMITTEE'S REPORT.

ENORMOUS DEFICIENCIES.

Your Committee find tbat the preseut directors of the Bank are not responsible for the present unsatisfactory condition of affairs. The Committee consider that the present directors have acted efficiently since they took office, and have candidly aud fully given every information to the Committee.

There is a deficiency of £376,900, and a contingent dependency of £200,000 in the Bank; there is a deficiency of £467,077 iu the Estates Company, against which no assets exist, and a further deficiency of £444,601 in trading concerns qnd properties outside New Zealand. These altogether amount to £1,488,578. Of this sum £148,110, which, though shown as a liability, is really debts due by the Agricultural Company, and represented by assets. Deducting this from the aforesaid sum of £1,488,578 there remains £1,840,468. This is provided for as follows : Capital of the Bank £900,000, estimated amount of call £450,000; total, £1,350,000, leaving a balance of £9532, which goes to a dependency account. Your Committee are of opinion that in the present financial circumstances of the colony, and taking into consideration the financial position of the Australian colonies, and also considering the magnitude of the interests, both public and private, which are involved, as well as the widespread disaster that would follow should the Bank be compelled to suspend operations, the colony should render such assistance to the Bank as will restore confidence, insure stability, and enable it to carry on its .business in a satisfactory and profitable manner. The Committee is of opinion that any assistance should be of an effective and definite character. The amount to the credit of depositors on 81st March, 1895, was, "in New Zealand, £5,032,900; in other colonies, £530,223; in London, £1,578,632; making a total of £7,141,755, included in which are Government deposits amounting to £1,145,396.

-. . . The colony of New Zealaud independently of the "A" Stock £2,000,000, and remittances in transitu—is creditor to the Bauk for £1,403,003 ; the amount in New Zealand being £458,000, and in London £945.000.

Your Committee is of opinion that it would be in the best interests of the colony, of the shareholders of the Bank of New Zealand, and of all concerned that a separation of the affairs of the Bank of New Zealand and the Estates Company should take place. In dealing with so momentous and intricate a question it is a necessity that every precaution should be taken to safeguard the colony against losses and to render future application for the intervention of Parliament unnecessary.

To effect this your Committee recommend that the whole of the freehold?, leaseholds, stations, stock, and implements in New Zealand be disposed of, and that the Bank of New Zealand and Estates Company sell them to a Realisation Board, to be established for that purpose; that an Assets Realisation Board, consisting of three members, be created as hereafter provided by the Assets Realisation Act, and the Board be authorised to issue cent interest and that the deficiency, if any, on these bonds after the realisation of the New Zealand Estates Companies properties be guarranteed by the colony to the Bank. In return, for these the Bank of New Zealand, the N.Z. Estates Co., and the Auckland Agricultural transfer the whole of the property* referred to to the Realisation Board for liquidation purposes ; that £500,000 of uncalled reserve liability of the Bank of New Zealand shareholders be called up in four equal instalments, the first being payable on 30ih June, 1896, the second on 31st December, 1896, the third on 31th June, and the fourth on 31st December, 1897. That to encourage the shareholders of the Bank to meet the call of £500,000 proposed to be made your Committee recommend that the first charge on all annual profits of the Bank beyond £50,000 per annum should be a payment of interest not exceeding five per cent on the amount paid by shareholders on the call as aforesaid. That the Bank of New Zealand out of its profits pay to the Assets Realisation Board the siim of £50,000 per annum as hereinbefore mentioned, and any further sum which may remain after paying 5 per cent to ordinary shareholders until any deficit on realisation is provided for. The Committee recommend that the first call, the last payment of which is due on the 26th November next, estimated to amount to £450,000, together with the present paid up capital amounting to £900,000 be written off to provide for losses, of which £1,150,000 is for ascertained losses, and includes £9558, which is proposed to be held as a dependency and £2oo,ooo'as a contingency for unascertained loss.

In conjunction with this proposal, and to enable adequate capital to be provided for the Bank to carry on its business and restore its credit, your Committee recommend tbe colony to subscribe £500,000 for preferential shares bearing 3i per cent interest, and that they be paid for by the issue of 8£ per cent stock to the Bank, the Bank to have tbe right to purchase any or all of these slmes ; provided they are sold, present Bank shareholders to have priority. This with the £500,000 of capital from the second call of the reserve liability will give the Bank of New Zealand a clear capital of £1,000,000 sterling. The Committee recommend that

the second million of the Government guarantee be placed at the disposal of the B ink for use in its general business, and that power should be granted to the Bank to enable it to buy up any other banking business so as to increase its trade, the sanction of the Governor-in-Couucil being first obtained. It also recommends the colony's business in London be done through the Bank. This the directors estimate would result in a net earning power of £135,000 per annum. That in consideration of the £500,000 preferred shares to be taken up by the Government the colony shouldhavefuitber representation,and that the Governor-in-Conncil be empowered to appoint one director. That the Assets Realisation Board shall consist of three members and inasmuch as the colony has guaranteed the deficiency, if any, on the bonds to be issued by the said Board the Goveruor-in-Conncil shall appoint two members and the directors of the Bank of New Zealand one member.

The Committee are of opinion that the shareholders of the Bank should be prohibited by law from winding up the Bank until the whole of the obligations to the Colony are repaid. This is an obvious precaution, considering the large responsibilities of the Bank to the Colony. With the papers appended to the report will be found a scheme submitted by the Directors of the Bank of New Zealand.

The Committee did not see its waj to accept it, seeing that it entailed heavy obligations upon the colony which the circumstances of the case did not warrant. The Colonial Treasurer also submitted a scheme the distinct feature oi which was that the colony did not directly issue stock to the Bank as against the assets of the Estates Company, but in lieu thereof, as a last resource, the colony guaranteed the deficiency on the bonds. Sir Robert Stout also placed before the Committee certain resolutions. These will be found with the papers appended to the report.

BANK DEBATE IN THE HOUSE. Wellington, Wednesday. Mr Seddon said it was proposed that Mr Ward should be allowed to move the second reading of the Bill and fully explain its provisions. The debate would then be adjourned till next day. He anuounced that in order to provide gainst all-contingencies, the GovelAhnent would to-morrow issue an Order-in-Council to make the notes of the Bauk of New Zealand legal tender. That would ensure the position of the Bank until such time as the House decided whether or not it would come to the rescue' of the B.ank. Mr Mitohelson regretted that the debate was not wholly adjourned till tomorrow, as members might tonight make speeches damaging to the Bank. The House then went into Committee to permit the introduction of a Bill to make certain provisions in connection with affairs of the Bank of New Zealand.

Several members objected to the speech of the Colonial Treasurer going forth to the.country unanswered, and a veiy long debate ensued.

Mr Seddon said that if it went to the country in the moraing that the House had not allowed the Bill to be brought in, it would be detrimental to the interests of the Bank.

Mr Ward pointed out that the assets of the Bank in excess of the liabilities in this colony alone were £2,450,000. This showed clearly that the institution was solvent.

Mr Bell said the Bank was doing what it did last year. It was driving the Government and the House at the point of the bayonet, and the Government was surrendering. Mr George Hutchison took very strong objection to the proposal to guarantee the notes of the Bank, contending the Government could not legally do this as the assets of the Bank did not exceed the liabilities.

Mr Ward however, pointed out that the Act provided that assets within the colony must exceed liabilities, and this they did do.

The discussion lasted until midnight, so that Mr Ward was unable under the Standing Orders to move the second reading. Mr Ward said he regretted members had taken up such an attitude.

Eventually a motion by Mr Earnshaw that the Chairman leave the chair as a protest against the guarantee of the note issue by the Government was lost by 46 to 11, and the Bill was introduced and read a first time. Mr Ward made a statement on the Bill, in the course of which he said the Government had decided to guarantee the note issue of the Bank to provide against the possibility of any panic occurring whilst the proposals were being considered by the House. The Bank must be placed in a position to carry on genuine banking business. If the Bank of New Zealand were allowed to close its doors trouble would not end there, and the revenue of the colony would fall by about a million a year. The motion for'the second reading of the Bill was fixed for 2.80 p.m. on Thursday. Wkllixgtox, August 29. A Proclamation was issued by Gazette Extraordinary late last night giving Bank of New Zealand notes the guarantee of the colony from 29th August to 2nd September.