COLONIAL BANKING.

Otago Witness, Issue 765, 27 July 1866, Page 1

COLONIAL BANKING.

(From the Dailt Tim as, JuV 21 )

News from Europe is at all times interesting to a Colonist ; hut it is usually because of the sympathetic tie that binds him to the country which he has left. Under ordinary circumstances, the interest is speculative. The course of •events may tend to Continental troubles, into which even England may be dragged ; the news may tell of war in Europe or America, but a Colonist seems in a harbor of refuge. The sound of tbe passing storm is heard ; but its fury fails to reach his newly chosen abode. It has, however, proved eomewhat different this time. The telegraphic news received in June, told that the prospect of war in Germany had affected Commercial Credit in England and throughout the Continent, and that several heavy failures had taken place ; but it remained for the Mail just received to shew to us, that distant as Dunedin is from London, the effects of the monetary crisis could be felt even here. On the receipt of the Telegraphic News from Meloourne, announcing tbe failure in London of the New Zealand Banking Corporation (Limited), the Manager of the Commercial Bank of New Zealand (Limited) felt it his duty to suspend payment. The Bluff Telegram received on Wednesday had led some depositors to withdraw their accounts, and holders of notes to seek to obtain gold in exchange for them ; but the run had subsided, and confidence seemed about to be restored, ■when the more explicit statement of the failure of the London office led to the closing of the doors. There is nothing so unreasonable as a panic, and nothing so likely to produce tbe very event feared. Persons in panicstruck crowds, whether alarmed for their lives or their property, seldom reason. They fear a something and in their unsystematic efforts to ccape from danger, tjiindly rush upon it. Although the Commercial Bank (Limited) stopped payment from circumstances over which the manager here had no control, it by no means followed that any other Banking establishment was in danger ; but an unreasoning apprehension grew up, which, had it not been for the foresight of the Directors of the various Banks in the City, and the ■commercial stability of each, might have been productive of further inconvenience. So severe was the run on the Bank of Otago, that an extra clerk was required at the counter, to assist the teller in meeting the demand for gold. Had the Bank been weak, it might have been seriously shaken ; but the pressure of yesterday has established its strength. Every demand was met so promptly, that confidence wa3 restored. Excitement is how■ever so easily got up, and upon such trivial grounds, that we deem it a duty to lay before the public some facts tending to prove the safety and stability of our Colonial Banks and Bankiner system. And first, a word as to the Bank that has stopped payment. Holders of notes and depositors need be under no apprehension ■whatever of ultimate loss. The assets of the Bank exceed the liabilities by L4OOO. And when we state that the assets exceed the liabilities by L4OOO, that sum is altegether apart from the large margin of capital not paid up, and which forms a further guarantee for the payment of the debts of the Bank, in full of all demands. This amount of additional security to creditors is equal to L 540,000 ; tbe subscribed capital of the Bank being L 600,000, of which only L6O 000 has beeD paid up, leaving a margin of L 540.000 for contingencies. Our information leads us to believe, that from the arrangements made, in a very short time, all Colonial demands will be liquidated* The only other Bank established in Dunedin under the Limited Liability Act is the Bank of Otago, the constitution of which differs very widely from the Bank just mentioned. The New Zealand Banking Corporation stopped payment because the directors in London could not obtain advances upon the securities they held. The Bank of Otago has no connection whatever with England, and cannot be in the slightest degree affected by the crisis there, as its whole business and capital are concentrated in New Zealand. The return for the month of June, which •has already been made up, shows that the whole average liabilities amount only to L 191,216 12s Bd, which is some thousands within the amount of capital stock paid up; whilst the coin, bullion, and securities amount to L 512,346 6s 2d,

showing a surplus of L 320.000. It ■will be seen by this statement, takep from the official return, that the Bank is able to nay nearly three pounds for every pound it owes, and no one need ask for better security than that.

But there is a wide difference between the English system of Banking and the Colonial, very much in favor of the latter Tn England, and especially in London, Bankers retain in their hands convertible securities, on which, in ordinary times, they can at any moment, obtain advance?, or which they can readily dispose of. They therefore do not think it necessary to prepare for contingencies so rare as the crisis which so suddenly came upon them at the prospect of war. They have Discount Brokers or the Bank of England to report to. and are in the habit of keeping remarkably small stocks of coin or note* that are a legal tender. When, therefore, the crisis came, they were unprepa T ed for it ; they could not realise on securities, and hence thnir failure. In the Colonies it is widely different. Every one of those rich Banks which have their branches in Dunedin, keeps a stock of coin as large in proportion to iti liabilities, as the Bank of England itself, and does not depend upon any other Bank tor assistance. On reference to a quarterly return furnished by one of them in March, the " Coined Gold and Silver and other metals" held, was nearly twicp the amount of its circulation, and fully one third of the whole amount of its liabilities — a proportion without a precedent in Great Britain. In another Bank the coin of all metals helrl. amounted to twice and a half its circulation, and about one half the amount of its liabilities, and an examinaof the balance-sheets of the remaining Banks would give like results. In fact, tbe cold coin held in the Colonies in proportion to the population, compared with the amount required for circulation in Great Britain, is something enormous. At Home the coin was estimated some years ago, by a writer in the Bankers' Magazine, at something like forty millions (more or less) or about, in round numbers, two sovereigns for every inhabitant of the country, with a tendency to decrease as payment by cheques becomes more general ; but in Dunedin, with a population of some fifteen thousand, the quantity ot coin at the present moment in the hands of the Banks is over a quarter of a million, which can be increased at need ; or nearly eleven pounds sterling per head, irrespective of the large amount circulating from hand to hand among the people, which must be estimated at many thousands more.

"We have entered rather more minutely than is customary into these somewhat dry monetary details, with the view of placing before the public reliable data on which to rest a judgment. The examination into these details has been as satisfactory to oursdves as its results must be to the public, who cannot but see from the facts laid before them, that there is every confidence to be placed in the Banking Institutions of the Province, and that none but those whom ne reasoning can convince will give way to weak and causeless alarm.