Banking Enquiry.

Opunake Times, Volume V, Issue 203, 14 August 1896, Page 3

Banking Enquiry.

Wellington, August 8

Mr Booth, examined, thought the appointment of Mr W. G. Foster as manager of the Estates Comply was a great advantage and had sa- cd the hank many thousands of pounds. Properties were valued by Mr Poster prior to the information being laid before Parliament in 1895. The books of the bank was responsible for the valuation of £1,879,000. He was not aware there was any loss on properties in 1895 different from that which had been accruing for some years previous, all of which had been bad years. He could not say whether any sums were written off from private accounts by the Estates Company. Arrangements regarding the Matamata property was made in London in connection with the reconstruction of tbe Loan and Mercantile Company. Witness then detailed the negotiations for the purchase of the Colonial Bank during the session of 1895, Negotiations were conducted for the directors of the Bank of New Zealand by the President, and there were no formal written communications between the directors of the two banks on the subject. He knew of no formal definite scheme of ■ amalgamation, and the transaction was practically an evolution arising from tha examination and discussion, occupying several weeks. The agreement arrived at was the gradual growth of the discussion between the directors and the principal officers of Bank of New Zealand. Every individual account was examined by the Directors before being taken over, Negotiations were at one time suspended, the Colonial Bank Directors being naturally very much disappointed at the view the Bank of New Zealand Directors took of their business. The fullest information that could be "desired regarding the various accounts was given by the Colonial Bank Directors. Part of the consideration for the Bank of New Zealand taking the properties of the Colonial Bank at book value was, as he stated yesterday, that two accounts of £20,000 and £SOOO were guaranteed by the President. He could not say whether the Directors were consulted on the matter or whether the directors approved of it. Witness said he thought the committe should recommend that a provision should be made by which Directors can call upon an auditor to report anything which they think should be reported to the Colonial Treasurer for tbe time being so long as tbe Bank bore the relation to the State which existed at present. Mr Montgomery—Was this advance of £20,000 secured upon debentures of the Ward Farmers' Association.

Mr Cooper—l advise 'witness not to answer that question. Mr Booth thereupon declined to answer the question on the adviee of Mr Cooper on the ground that it would be giving information regarding private accounts.

Mr Seddon raised a point of order, contending that the question had no right to be put until the writing off in connection with the account has been proved. Mr Montgomery thought the question absolutely necessary in the face of the action of the President in guaranteeing the advance. Mr Seddon contended his action could be discussed without a name being divulged. Mr Booth said that there had been no writings off in connection with the advances. After further discussion the Chairman ruled the question out of order, and Mr Montgomery proceeded with bis examination on other matters.

Witness said he had no knowledge that any members of the Government were aware of the negotiations of the purchase of the Colonial Bank. No discrepancies were noticed in the Colonial Bank balance-sheets. The Bank of New Zealand had now more than sufficient assets to meet the liabilities. The position was now more favorable than last year. The Bank was doing a safe business, but to keep it safe another auditor was required, and continuous oversight should be kept over all accounts. All colonial banks should make better provision for bad and doubtful debts. The Colonial Treasurer for the time being should not have any interest direct or indirect in any advance in the bank, but he would like to say he had no knowledge of any shadow of interference on the part of the late Colonial Treasurer in the affairs of the bank, and at any time the President had ever exercised his veto.

Mr Montgomery—ls he likely to suffer ultimate loss through the bank ?

Mr Booth, —I think the colony is not likely to lose one shilling, always provided the management of the Bank is capable, competent, and trustworthy and that arrangements for the conduct of its business shall not require interference such as is contained in a Parliamentary enquiry of this kind. Mr Booth was examined by Mr Hutchison.

He gave particulars of remuneration paid to directors and to the attorney of Estates Company in New Zealand, and was examined in regard to the formation of the Estates Company, but could give very few particulars of his own knowledge in investing £150,000 of two million guarantee in New Zealand consols at 3£ per cent. The directors had the approval of the Colonial Treasurer." He did not think money had come back to the Bank by way of deposits. He did not know that it came back through the purchase of the Colonial Bank. He could enquire, but thought Mr Hutchison was mistaken that the call of £500,000 was by directisn 'of the Colonial Treasurer, and he would procircular on the subject. He .qjear no overtures for further assistance were made either by the Bank or the Estates Company prior to 4th August, 1894. Witness

did not acquiesce in Mr John Murray being sent for last year, and he did not know by whose authority the sum of £SOO was voted to Mr Murray for his services in connection with the banking legislation of 1894, as he was not a director at that time. During his time of directorship no negotiations were made for the purchase of any other bank except the Colonial Bank. The two Boards of Directors had no direct communication on the subject. He had no knowledge of any recommendation being made by the directoiate of the Bank of New Zealand as to election of president. The directors had taken no legal advice as to how the contingency fund of £200,000 to meet bad and irrecoverable debts should be used. In fact they had used some £54,000 out of the profits for the year for writing off these debts. Their reading of the Act was before they sot anything aside as profits they must first make ample provision for bad and doubtful debts. They did not think that before rising the profits in this way they must first exhaust the £200,000 contingency fund. Witness gave further details of the amalgamation proposals. Mr Button, M.H.R., the Bank's solicitor, drew up the agreement, which was submitted to the Colonial Bank directors. There was no agreement by either bank. The directors of the Bank of New Zealand obtained from the Colonial Bank directors what they would finally concede, and the agreement was drawn up accordingly. The agreement for the purchase of the Colonial Bank only indemnified the Bank of New Zealand to the extent of the C list. In respect of the B list, the Bank of New Zealand took cover for what it thought sufficient, viz., £272,000. The writing-off undertaken in connection with the agreement was no doubt carried out. Mr Hutchison—Did the Bank of New Zealand on this contract taking effect write off the amount which appeared in the right hand column of the C list from amount known to exist. Mr Booth—The Bank of New Zealand had no right to write off* I wish to say that whatever may be the working of that clause we, having this C. list of accounts guaranteed, are not interested in what is done with them.

Mr Cooper here objected on behalf of his client to this matter being pressed further.

Examination continued. Bank understood that £55,233 in the C list was not written off, but credited to the amount of £98,282 in the list. This amount was guaranteed by the Colonial Bank. The Bank of New Zealand had never taken any account in the C list. They had three months in which to decide whether they would take over any of the C list of accounts. One day before the termination of the three months the Bank decided not to take over any of the C list accounts. In coming to a decision as to amalgamation the directors of the Bank of New Zealand had the assistance of inspectors of the Colonial Bank, but they relied on examination of accounts made by their own officers if it was necessary to ask for any information as to accounts in the C list. Witness knew from books accounts in the C list the sums of £20,000 and £5,000 mentioned by him on Friday and Saturday had no connection with the C list, or with any of the other lists. Mr Hutchison—Has this sum of £20,000 any reference to a parcel of debentures ?

Mr Seddon rose to a point of order and urged that the Committee must keep within its order of reference. There must first be evidence of writ-ings-off before these particulars could be gone into* A similar question was ruled irrevelant on Saturday. Messrs Hutchison, Montgomery and Maslin urged that the question should be allowed as it had reference to the purchase of the Colonial Bank, and the amount paid for the goodwill. Mr McKenzie submitted that as there had been no writings-off in connection with this sum the Committee could not enquire into it, otherwise they would be entitled to enquire into the accounts of any customers of the Bank whether there had been writ-ings-off or not.

After considerable argument the Chairman ruled the question irrelevant at the present time. Witness, continuing, said the directors of the Bank of New Zealand expected to lose £30,000 or £35,000 on the Colonial Bank properties and premises.

Mr Hutchison asked several questions in reference to the £35,000 advances, but Mr Booth declined to answer most of them as it would involve the disclosure of private accounts. He could not say whether the directors were responsible for the advance as answer to the question would traverse the Chairman's ruling on Saturday. In fact he must decline to answer the question on the ground that it would involve the disclosure of private accounts.

Wellington, August 10. The Chairman asked direction of Committee as to what documents should be printed of those produced by the witness. Mr Montgomery objected on the ground that the publication would be prejudicial to the interests of the Bank.

The Premier contended on broad grounds that the public were entitled to the information, and moved that the documents be printed. The Committee resolved that the documents be printed with several others.

On the question of Mr Booth's refusnal to answer questions asked at the morning sitting, Mr Hutchison moved, " That there being no evidence now before the Committee, that under the agreement of the 18th October, 1895, between the Colonial Bank and the Bank of New Zealand that the

last-named or purchasing Bank shall immediately on this contract taking effect write off the amounts standing at the right-hand column of the 0 list and credit the respective accounls in such list with the amounts so written off, this committee calls on Mr W. Booth, the witness now under examition, to produce a certified copy of such C list."

The Premier objected tbat notice of motion must be given.

It was resolved that notice of motion be given. Mr Hutchison moved, That consideration of Mr Booth's refusal to answer certain questions be defeired.

The Premier seconded the motion.

Mr Montgomery, in supporting tbe motion, said the question which Mr Booth declined to answer would have to be replied to by someone. The motion was agreed to. The Committee proceeded to discuss a motion by Mr Guinness to exclude the press from its meetings.

The Chairman ruled that as the Committee had passed a resolution at a former meeting that Mr Booth's evidence be completed before dealing with the notices of motion, Mr Guinness' motion was not in order.

Wellington, August 11.

Mr G. Hutchison asked Mr Booth whether he had any objection to produce a certified copy of the C list. Witness replied that he could not produce the list for the reason that although the C list was not taken into the Bank the names in the list were the names of customers of the Bank holding confidential accounts in the institution.

Mr Hutchison asked the witness whether the Ward Association, now in liquidation, was indebted to the Bank of New Zealand. Mr Booth declined to answer.

Several questions were asked with regard to the two precarious advances of £25,000 belonging to the Colonial Bank, but witness declined to give any further information on the matter. Some profit had been made on the Colonial Bank business this year, but it was impossible to say how much. The Bank of New Zealand would benefit to the extent of £20,000 or £22,000 per annum.

Mr Hutchison—But is that not all assumption ? Mr Booth—Certainly not. This estimate is the result of a safe and reliable valuation. Witness proceeded to say that under these circumstances £75,000 was not too much to give for the goodwill of the Colonial Bank. Mr Seddon rose to a point of order, and the Chairman ruled the Committee had no right to enquire into the private accounts of persons and companies, unless there had been writ-, ings-off in connection with them. Mr Hutchison—Was there any writing off from John Byley's acoount? Mr Booth—l do not want to depart from my refusal to answer these questions, but I may say in this particular oase there was no writing off. Mr Hutchison—Then do you say there was no writing off in connection with the Ward Association. Mr Booth—l decline to answer that question. August 12. In the course of the examination before the Banking Committee, Mr Booth admitted that Mr Henry McKenzie was practically posted (foisted ?) on the Bank of New Zealand directors by the President. The directors were adverse to the appointment, and the matter was remitted to the Premier, who, while declining to give an opinion, suggested that Mr McKenzie should be appointed manager subject to threee mouths' notice which course was adopted. Mr Booth, in answer to Mr Guinness further said that in his opinion a very much stronger and more reliable man than McKenzie was required as general manager of the bank.