THE BANK OF NEW ZEALAND.

Otago Witness, Issue 2167, 5 September 1895, Page 3

THE BANK OF NEW ZEALAND.

(Daily Times,, August 29.)

The report of the Bank Committee, ■which in. outline substantially agrees ■with the forecast of our Wellington correspondent published in our columns last week, is now before thecolony. It is superfluous for us to say that it is a momentous document, and as needless to add that we write upon it •with a sense of responsibility never felt before in commenting upon the public affairs of New Zealand. The salient points of the report may be very shortly placed before our readers. Accepting the valuations which guided the committee in their report, there is a total deficiency in the affairs of the bank of £1,340,468, which is provided for by a sum of £1,350,000 (the existing capital of £900,000 and the amount accruing from the recent call), so that the institution may be said to be just solvent. As a means of enabling the bank to carry on its business, which it obviously otherwise could not do, the colony is called upon to again come to its assistance with a further sura of £3,234,000. Of this sum, £2,734,000 is to bo issued in bonds representing the face value of the Estates Company's landed properties of all kinds within New Zealand, which are to be realised forthwith. In other words the colony is to purchase — for that is what it amounts to — at their nominal value the whole of the New Zealand assets, with the exception of some trading concerns, and immediately proceed to realise them on behalf of the bank. The other sura representing the £3,234,000 is the halfmillion of share capital to be subscribed by the colony. The security for all this money is .to consist: first, in the proceeds of the realised assets; secondly, in a payment by the bank of £50,000 a year out of its profits when set up on the new basis ; and thirdly, by what is practically a mortgage over a new call of half a million upon the shareholders (to be made In four instalments over a period of two years), as also over another half million of uncalled reserved liability. The present capital of the bank, together with £450,000 estimated as the proceeds of the last call — in all £1,350,000— is to be written off to provide for losses ; and the bank starts afresh ■with a new capital of three millions — namely, the two millions guaranteed last year, the new call of half a million, and the preferential shares of the colony to an equal amount. Of the two million guaranteed last year, one is, of course, untouched, and must be freed by statute to take its place as part of the capital of the bank. The committee assumes that all this will place the institution in £ N perfectly sound position. It further * assumes that its

■earning power may be so increased as to enable it to yield a profit of £135,000. But it is to be observed — what might otherwise escape the notice of even a careful reader of the report — that this estimate of profit is contingent upon the purchase of the business of the OoloniaLßank. Nothing else can be meant by the recoromondation of the committee that provision should be made for "purchasing other banking business." And if the ordinary profits of the Bank of New Zealand in fair circumstances, say £55,000, be taken with those of the Colonial Bank, say £28,000, and the profits from the use of last year's guaranteed two millions at, say, 3 per cent, or under be added, the £135,000. estimated profit will come out as near as possible. And the committee recommends that the power to purchase the Colonial Bank be taken from put the hands of Parliament, where it now rests- by statute, and placed in those of the Governor-in-Council — that is, of the Government.

Such in main outline is the scheme of the committee. Perhaps it is the best scheme that could be evolved under the circumstances, and if we express approval of it we should wish it be understood that it is only because these same circumstances compel us to do so. The proposal is to place the Bank of New Zealand, for good or for evil, on the back of the colony for all time, and to swallow the Estates Company at one gulp. The intention is to even saddle the colony with two banks. ' It is possible that the whole business will come out right, but whether it comes out right or wrong, there will be no drawing back after this step is taken, for the colony will be almost the entire proprietor of the bank. The securityoffered to the colony for its responsibilities may be the best available, and if affairs turn out well it may not be bad security. "We believe that the position of the bank has been in a general way honestly probed to the bottom and the worst as far as it was known revealed. In this respect the circumstances this year are very different from what they were 12 months ago. Mr Mueejly's object then was to get the immediate shelter of a State guarantee — to reveal as much as would secure that and to reveal nothing that would jeopardise it. The object of the new directors and the president, no doubt, is for the sake of their own reputation to reveal everything and start the bank on a sound career. But after all it is only the Estates Company's properties that are dissected and provided for. The assumption is that the ordinary business of the bank is sound, and if that should not prove to be so, or the institution should not Nourish under its new constitution, the colony would have to bear the ultimate loss. Its position towards the bank would be that of an ordinary mortgagee, and in the last resort the only resource would be to take it over bodily as a mortgagee would a property. It is extremely questionable too whether the Estates Company's properties would realise even the amount to which they have been written down— £l,B79,ooo. But with all these things before our eyes, and other possible contingencies as well, we think that the best, indeed the only, thing to do is to accept the scheme of the committee. As we have said, the circumstances compel us to come' to this conclusion. The entire responsibility for the unhappy position in which the colony is placed in having approval of this portentous scheme extorted from it rests with the Government. The fatal act of guaranteeing the two millions did the business for the colony. It is only now that the true nature and quality of that act become apparent. In common with Parliament and the general body of public opinion in the colony, we approved of the guarantee. At the very worst it involved a ! debatable policy. That approval was everywhere given upon the assurances of iMessrs Seddon and Ward — for we do not suppose that the other members of the Government had an opinion upon the question — that the liability of the colony for two millions was final and complete, that the bank with the assistance of the guarantee would be placed in a perfectly sound condition, and that " firm, sound, and unmistakable financial stability " — these are Mr Waed's own redundant words — would be the result. It was not possible to do other than accept his assurances. The circumstances would not permit of any dissent. Virtually, actually in substance, he said to the House and the country : "We are trembling on the verge of a great financial crisis, fraught with the most disastrous consequences. We, the Government, are in possession of all the facts and have given them the

gravest consideration, but we cannot reveal them. You must place implicit confidence in us, and without discussion or loss of time accede to our demands." Who could have believed that confidence so loyally reposed would be so swiftly and so miserably betrayed ? That in the space of twelve short months the same I gentloman, in th« earn© wordSj Jor the I same purpose — to place the bank in a sound position — should find it necessary to avow that another sum of .£3,200,000 must be thrown after the two millions. It is a case of throwing, not a sprat to catch a mackerel, but a mackerel to catch a sprat — though the sprat is an unfortunately large and important one. Can it be supposed that had the two demands been made together 12 months ago anyone in the colony would have approved of the scheme — a scheme to guarantee £5,200,000? And yet owing to the hopeless incapacity of the Government it is now impossible to repudiate the scheme of the Bank Committee. The Government on their d"\vn showing had a longer period in which to inquire into the true ' nature and bearing of Mr Murray's demands than the committee has had to investigate the present position, and the present position as now revealed is the • commentary upon the manner in which they used their opportunity ! It is enough for us to say in one sentence that incapacity so unparalleled, so unique, has never before been revealed in the annals of modern English politics. The four millions, or whatever else the sum was, given by Lord Beaconsfield for the purchase of the Suez Canal shares was a mere trifle even as compared with the English i revenue, but had that statesman come before the House of Commons 12 months after to say that the money would, by his own blundering, be lost unless another seven millions were sent after it he would never have been heard of again, though his blunder would have been nothing compared to that of the New Zealand Government.

There is jußt one thing more we wish to say. The committee proposes that the law should be altered to enable the Government to purchase the Colonial Bank at their will. The House will stultify itself if it does not sternly repudiate the suggestion. To put the matter quite frankly, we do not think, after what has gone before, the Government, which has already compelled the colony to take over one bank, should be entrusted with the power of taking over another at its will. It may now be desirable for aught we can know to absorb the business of the Colonial Bank, but it is for the representatives of the people to judge o£ the necessity after due inquiry, by committee or otherwise, has been made into the scope and bearing of the step.

The debate on the committee's report has been very properly adjourned until to-day. The matter has gone so far now that all necessity for undue haste is at an end. There is, however, not the smallest occasion for alarm. Thanks to the tyro million guarantee of last year the depositors in the Bank of ISlew Zealand are -perfectly safe, quite as safe as they would be were their money in the hands of any other bank. And the Gazette notice by which the notes of the bank are lawfully declared to be legal tender, and which will be found in another part of our to-day's issue, must place the holders of them perfectly at their ease.