Banking Committee.

Opunake Times, Volume V, Issue 220, 13 October 1896, Page 3

Banking Committee.

TOE REPORT. Tbe report of Uie House Cou on Banking, states that’since 1888 a sum of £2,924,663 has been written off, ta which had to be added £1,116,186 estimated deficiency in properties transferred to tbe Realisation Board &c., making a total of ascertained and estimated losses of £4,040,799. During tbe period in which these lossess were made no less than £265,688 were paid away away by the directors in dividends. These figures, the report significantly observes, tells the story of the past management of

the Bank. The Committee are of opinion in the light of subsequent events that it should have been a more prudent course not to have formed the Estates Company, but have called up the reserve liability of the shareholders and thus provided the bank with necessary working capital. The effect

had been through tbe operation of the Act of 1889 to enable a misleading

item (shares of the Estate Company) to appear on the Banks balance-sheets and allow dividends to be paid when the Bank was actually going from bad to worse every year. The Committee are very decidedly of opinion that it is undersirable that the Bank should engage in commerce, and they recommend that tbe trading concerns should be realised upon as soon as possible. To effect this the directors estimate that from two to three years will be required. They consider, however, that before ..passing the Guarantee Bill the Government and the Committee of the Legislative Council should have insisted on information as to the position of the Estates Company, and that the withholding of information which was said to be possessed by Mr Murray was, if intentional, reprehensible. Had, however, fuller information been obtainable at the time it would not have been sufficient reason for the Government to refuse to assist tbe Bank. From detailed information now in possession of tbe committee they have no doubt that the action taken in assisting the Bank of New Zealand in 1894 was prudent, and that a national disaster was averted. The evidence, the report says, is in favor of additional power being given to the liquidators, so as to enable them to compromise or nurse the accounts. The evidence goes to show that it

would be advisable for tbe directors of

the Bank of New Zealand and the * liquidators of the Colonial Bank to arrange for the taking over of the accounts, cover being determined by arrangement. The Committee were of opinion that if the suggestions of wit-

neasess to give power to permit the

present liquidators to continue the liquidation as provided in the deed of settlement of the Colonial Bank inBteal of being restricted by the provisions of the Companies Act (which requires the liquidators to obtain an order of the Supreme Court before they can compromise any account) are to be given effect to, such power should only be given subject to the approval of the shareholders of the Bank. Beyond this the Committee had no recommendation to make. The subject of the balance-sheets of the Colonial Bank and the conduct of its directors and officers were included among the subjects mentioned in the order of reference, and the Committee are of opinion that the balance-sheet dated 81st August, 1895, did not fully disclose the position of the Colonial Bank as disclosed in the examination which proceeded the purchase agreement, which shows that mismanagement must have taken place, the responsibility for which rests upon the directors and officers of that institution The Committee are of opinion that the crisis in the Bank of New Zealand’s history in 1888 was directly traceable to errors of judgment and gross mismanagement of the directors and officers of the Bank. The Committee are farther of opinion that the conduct of the directors and executive officers at that time ought to have been made the subject of criminal proceedings. The system of maintaining fictitious book value of property, whose real value had decreased year by year, is One which the Committee cannot too strongly condemn and that it should be a direction to the Board of Direc-

tors that the officers responsible should not be continued in the service of the Bank. In the opinion of the Committee it is essential for the success of the Bank of New Zealand and to inspire and maintain confidence in that institution that important alterations should be made. The committee, therefore recommend that reorganisation should take place. The office of the President should be abo-

ished, a new general manager should be appointed by Governor-in-Council, and one to be elected by the House of Representatives and one by the Legislative Council. The Committee recommend that as far as practicable the chief commercial centres of the colony should be represented on the Board, the Chairman to have power of veto and be selected by the Go-vernor-in-Council, The Council consider the present law is insufficient to compel Banks to state the exact position of their affairs in their balancesheet, and that legislation be introtroduced to further protect the shareholers and public. The Committee in conclusion recommend that the Bank’s business be confined as far as possible to this colony, except for the purpose of exchange, and express the opinion that with a competent expert and reliable management the Bank will ultimately be able to meet all its engagements.