BANKING IN NEW ZEALAND.

Otago Witness, Issue 3886, 4 September 1928, Page 17

BANKING IN NEW ZEALAND.

AN HISTORICAL SURVEY.

By

C. G. M.

< I. The introduction in the House of Representatives of a private Bill seeking legislative authority fcr the establishment of a new bank in the Dominion makes appropriate a brief history of the early days of banking in New Zealand. In the article which follows only some of the principal landmarks in the financial : history of this country are passed in review, and it has been found impossible to explore innumerable byways of inquiry, containing a wealth of incident and romance, which would repay a much more exhaustive study than has here been attempted. • 'jhe P ra ctice of banking, as it exists to-day, is the outcome in highly specialised torm ot the custom which the merchants and traders, of London first adopted, about the middle of the seventeenth century, of entrusting their money for safe keeping to the goldsmiths of the city. Following upon the foundation in 1694 or the Bank of England—now the greatest financial institution in the world—the system of deposits and of withdrawals by cheque gradually arose and developed un . tl J’i. a J j e Present time, it exists as an established practice, any interference with which would have disastrous consequences throughout the whole realm of commerce. In older lands banking history possesses a romance and a literature of its own. in America that history has been characterised by more sensational features than have marked the business of banking in any other country, and even in recent times the recurrence of some of these happenings, in the form of a “run on the !? a ... has not been an altogether unlaminar phenomenon. • While the men who initiated the banking systems of the Dominion were able in n zAi a ? U t l ir to Profit by the experience of the Old World, they had, nevertheless, to adjust themselves to the conditions of a new land, with its problems of settlement and development, and an expanding trade, subject to setbacks and reactions. Ihe progression towards the degree of stability that has been attained to-day has therefore not been unmarked by the ups and downs of fortune, and though the periods of depression have not been attended by any direct losses to the creditors or depositors of the banks, they have, on occasion, produced situations from which the elements of a crisis have by no means been absent. Particularly was this so in the early ’nineties of last century. Since the beginning of the present century, however, a remarkable expansion has characterised the trading operations of the various banks doing business in the Dominion, and so great has'bepn that prosperity in recent times that the conference of the New Zealand Farmers’ Union at its meeting last month was moved to deplore the alleged negligence of the Government in failing to restrict to what the conference considered reasonable dimensions the profits of' the Bank of New Zealand! Could' any stronger proof be furnished of the prosperous conditions in which our banking operations are conducted at the present day?

Three men who stood out conspicuously in the early days of banking in New Zealand were Mr Falconer'Larkworthy, Mr W. J. M. Larnach, and Mr George M‘Lean (later Sir George M‘Lean). They were men of strong individuality and courageous enterprise, and their names rank with those of Mr (afterwards Sir) James Mills, Mr (afterwards Sir) John Ross, James Macandrew, E. B. Cargill, R. Glen-

' J V A- Ewen, T. W. Kempthorne, J- 1- Wright, H. Driver, B. Hallenstein, W. H. Reynolds, James Rattray, Alexander Burt, and others, who, in earlier times, made Dunedin the commercial capital of the colony and founded business organisations, the branches of many of which 0 2 c ’*P y conspicuous premises in the cities of New Zealand at the present time. BANK OF NEW ZEALAND. So closely has its history been linked with the progress and development of the Dominion that the Bank of New Zealand is in many essential respects a national institution. For nearly 70 years this bank lias been associated with the commercial life of the Dominion, and its ups and downs—for it has run the full gamut of both have been a reflex of the prosperOUS or adverse conditions that have prevailed in the country at large. To. a group of business men in Auckland belongs the credit of establishing this institution, which has become one of the strongest of all our banking corporations. Though not actually the first bank in operation in the colony, it was the first institution of the kind that was able to claim a local origin, and it may therefore be said with justice that it owed its inception no less to motives of patriotism than to the urgings of commercial enterprise. ’ Execution of the design followed rapidly upon the conception of the idea and on October 16, 1861, the Bank of New Zealand was established in Auckland with a body of local directors. Fulfilling a popular demand, and having as its declared objective the welfare of the Colony, the young bank met with encouraging support’ under the stimulus of which its operations steadily expanded. From a small local beginning its influence soon extended throughout New Zealand, with branches and agencies in every part of of the country and for many years it paid dividends at a very satisfactory rate. Then the rising tide of prosperity ebbed steadily until 1887 when the bank entered upon the most difficult and dangerous period of its existence. In the times that followed, this country passed through the most critical period of its history—a period of depression during which many commercial firms faced grave difficulties, many land-owners sacrificed- their holdings, and concern and anxiety were experienced in all quarters, from the Government downwards. The Bank of New Zealand, upon the wellbeing of which far-reaching issues now depended, found itself face to face With a situation that demanded energetic measures. In 1890 the administration of the bank was transferred from New Zea-, land to a London Board and the New Zealand-Estates Company was constituted with the object of relieving the bank of the heavy responsibilities which it had incurred through the falling into its hands of numerous estates and business the owners of which had found themselves in serious financial jeopardy. At first, the ultimate success of this plan received Some encouragement, but difficulties were encountered by the Estates Company in the realisation of its property assets, and the lack of any silver lining in the clouds of depression, gradually brought the bank to of a crisis precipitated by conditions over which it had ceased to possess any control. . When the outlook was at its blackest the' situation was saved by Government interveirtipn. This statesmanlike step took the. form of the issue of £2,000,000 worth of stock guaranteed by the country, and simultaneously the con. trol of the institution was transferred from the. London Board to a board in Wellington with a president appointed by the Govern’or-in-Council. The action ofth'c Government of the day in thus coming to the rescue of a private concern did not escape severe criticism, and there were not wanting prophets of gloom who predicted that .'the State’s contribution of £2,000,000 represented only the first levy that would be made upon the public ?urse in sustaining the institution. So ar, however, from these forebodings being fulfilled the results have amply

justified the step taken by the Administration.

Later followed the legislation by which the Government became a shareholder in the bank; and about the same time the disposal was effected of the bulk of the New Zealand properties of the Estates Realisation Board, which had been set up for that purpose. Incidental, also, to these operations was the taking over in November, 1895, of the business of the Colonial Bank.

From this time a new era began in the history of the Bank of New Zealand. The reconstruction process was co-ordi-nated bj- subsequent legislation extending over a period of years, until the present constitution of the bank emerged, and the institution not only had at its command enormous material resources, enabling it to play an important part in the development of the country, but found that it possessed the greatest asset of all in the unqualified confidence and support of the people of New Zealand. The bank celebrated the jubilee of its establishment in 1911, by which time it had accumulated a reserve fund of £1.000,000. To-day, it occupies a position of great strength. It transacts half the total banking business of New Zealand, and its extensive connections embrace every phase of city and country activities, while its alliance ■ with The Government gives it a definite prestige. In the year 1861, 13. years after the founding of Otago, came the exciting times of the gold rushes, and on December 2 of that year the first Dunedin branch of the Bank of New Zealand was opened in premises in Rattray street, now occupied by the site of Wood’s Hotel. A move was made two years later to the present site, and the substantial stone structure which stands at the corner of Princes and Rattray streets is the second bank erected there since the removal took effect. The present building was opened on August 21, 1882. Among the names connected - with the early history of the bank in Otago nor.e stands out more prominently than that of Mr Falconer Larkworthy, whose death at the age of 95 years took place in Loudon in May last, and whose volume of reminiscences, “Ninety-one Years,” carries . the reader back to those days of romance—the early 'sixties. Mr Larkworthy was the first manager of the Dunedin branch- of the Bank of New Zealand, and his assistant during. the inaugural stages was Mr John Kissling, of Auckland. Mr Larkworthy 'Was. also the first buyer of gold on behalf of the bank at Wetherstones, and in his reminiscences he has much to say of that notable period in the history of Dunedin, when this city was the headquarters of the gold diggings, and when the amount brought down each week by an escort of mounted troopers rose rapidly from 500 ounces to 8000 .ounces. At the time when Mr Larkworthy entered the field the only two banks operating in Dunedin were the Union Bank and the Bank of New South Wales, the former having an agency at Gabriel’s Gully, and the latter at Waitahuna. The of the bank in Dunedin was Mr George M’Lean, afterwards a member of the firm of Cargills and M'Lean, and chairman of directors of the Colonial Bank, a Cabinet Minister, and for many years chairman of directors of the Union Steam Ship Company. THE UNION BANK. To the Union Bank of Australia belongs the distinction of being the first bank to transact business in New Zealand. Its beginning dates back to a very early period in the history of the colony—to a time, indeed, prior to the formal annexation of the country by the British Crown in terms of the Treaty of Waitangi, and just prior to the formation in London of a colonisation company by Edward Gibbon Wakefield, whose memory Parliament is now preparing to perpetuate. The prospectus of the Union -Bank was. issued in London towards the end of 1837, and less than three years later the first New Zealand branch was established in Wellington, before the site

of that city had been surveyed. The local directors at that time were Dr Evans, Mr E. B. Hopper, and Mr George Hunter, who was the first Mayor of Wellington. and was prominently associated with the business life of the city till 1880. The bank established its first New Zealand branch on the beach at Petone, and when the township of Britannia—as Wellington was then called —sprang into existence the safes were ferried across the harbour on a raft specially constructed for the purpose.

The Dunedin branch of the Union Bank was opened on January 2, 1857, in temporary premises in Mr John Sibbald’s private hotel, in Stafford street —now the Provincial Hotel. A move was made shortly afterwards to new offices in High street, where portion of Messrs Bing, Harris, and Co.’s warehouse now stands, and finally on September 10, 1874, the hank entered into occupation of its present building in Princes street. The first Dunedin manager was Mr Alfred Jackson. In 1861 a branch of the bank was established in Invercargill; in 1867 at Timaru, and in 1874 at Oamaru. THE ORIENTAL BANK.

The Oriental Bank Corporation, a London company, whose interests lay chiefly in India and the East, established a branch in Dunedin on July 27, 1860. In the file of the Otago Witness of Saturday, July 28, 1860, appears an advertisement bearing the date of the previous day in which it is announced that “ the Oriental Bank Corporation, with a paid up capital of £1,260,000 and a reserve fund of £252,000, and with the head office in South Sea House, Threadneedle street, London, has commenced business in premises in Princes street known as the Mechanics’ Institute” (now the site of Cargill’s Monument). The first manager was Mr A. G. Anderson, and the agent at Invercargill was Mr Thomas Watson. On August 8, 1861, the business of the Oriental Bank was acquired by the Bank of New South Wales. The London manager was Mr W. W. Cargill, a son of Captain Cargill, the first Superintendent of Otago. BANK OF NEW SOUTH WALES. Among the earliest of all colonial banka was the Bank of New South Wales, which was established in 1817, when the population of Sydney was about 5000 inhabitants and when the total white population of Australia numbered only 15,000. The Wellington branch was opened in 1861 in premises in Manners street, and. several years later a transfer was made to Willis- street. Later, the bank removed to the commanding site which it now occupies in Lambton quay. The Dunedin branch of the Bank of New South Wales opened its doors to the public on August 8, 1861, in the premises of the. Mechanics’ Institute, which had been taken over from the Oriental Bank. It was soon removed to the corner of Princes and Rattray streets, where the Government Life Insurance building now stands. In 1866 the bank transferred the scene of its operations to the present site in Princes street upon which two buildings have since been erected. The "first manager in Dunedin was Mr J, A. Douglas. BANK OF AUSTRALASIA. • The Bank of Australasia, which was in* corporated by Royal Charter on October* 28, 1835, and commenced operations at Hobart, has its head office in London and branches in all the Australian States and New Zealand. In December, 1835, a branch of the institution was founded in Sydney; but it was not until the early ’sixties that its operations were extended to the Dominion. The Dunedin branch was opened on June 12, 1863, in High street, in premises at present occupied by Messrs Sievwright, James, and NichoL The transfer of the bank to its present site in Lower Rattray street was effectedon November 11, 1882, and the building which now stands there was first occu* pied on November 1, 1907. Mr C. Cald* well was the first Dunedin manager.