CORRESPONDENCE.

Poverty Bay Herald, Volume XXIL, Issue 7296, 3 June 1895, Page 3

CORRESPONDENCE.

THE CURRENCY. (To THE EDITOB OP THE HERALD.) g IB i n New Zealand we have official statistics upon the subject of banks carrying on upon tick, and as "Echo" has not troubled your readers with the figures, 1 think it may be useful to supply them. 'I he banking returns to 31st March, 1895, give the following figures :— 1. The paid-up capital of the six £ s. a. banks in Now Zealand amounts g 2, The reserve 'fund of profits to «.™b rlitp . . .. •• ■8,207,038 8 5 8. Sea properties •• •• 528,682 11 10 Total _ £10,223,021 0 8 all of which belong to the banks, as their own property. On the side of liabilities to the public, the following figures are given : — r £ s. d. 1. Deposits from Government .. 648,218 11 4 2. Deposits from publio, not bear- „ tog interest ... •• .•• 4,619,669 6 8 , 8. Deposits from public bearing iq " interest .. 8,«C5,934 19 0 Total .. •• •• •• £14.033,722 17 0 If you deduct from liabilities of £14,033,722 r - -17a the total funds belonging to the banks, "' viz £10,223,021 0s 3d, that leaves the sum of £3,810,701 16s 9d held by the banks, of the money of the public, upon good faith alone. I have called this "tick," because I wish to put the matter in the most favorable way for the banks. Of course, in a wider sense, the whole £14,033,722 17s are " tick "—that is to say, are moneys loaned to the banks by the public, and upon which, or with which, the banks conduct tbeir business. But the £3,810,701 16s 9d are not represented by the subscribed capital or accrued funds, and j cannot be said to be in any sense secured. As I have Baid, they rest, in the strictest senae, .upon good faith alone, just precisely in the same way as A, in giving B £100 to aid him in carrying on his business successfully, and taking Bs receipt, would simply trust B. To the extent of the bank's total funds, as above given, the rest of the liabilities may be said to be guaranteed by the proper funds of the banks, although the goodness or sufficiency of the guarantee depends upon prudent management on the part of the banks. The banks trade upon and invest in various ways their own proper funds, as well as the funds lent them by the public ; but the material point for the public is that it has neither knowledge nor control of the transactions of the banks. And whatever may be the factß as to the other banks, there is the undoubted fact that the mismanagement of the Bank of New Zealand — our largest bank — brought it to the verge of bankruptcy, so that the State bad to guarantee a loan of two millions to save it. " Tick " and interest are the two particular rocks in banking business from which danger and expense to the community arise. The profits to the banks are great. How much do you suppose? The bank returns for the last twenty years, 1874---1894,showtbat the banks have paid in dividends... £7,043,179 12 3 And if you add to tbat the accrued reserve funds from profits ... ... 3,207,038 8 5 £10,250,218 0 8 The result is that the community has had to pay tor its banking facilities ten and a quarter millions of money, And Dot only this, but to that must be added tb.B enormous ; expense of conducting six separate extensive banking institutions. The risks can be avoided and the benefits gained for the community in, one way only, namely, by the community doing its own banking business for its own benefit. But that must be a State Bank ! Goodness gracious ! What will become of ub ? "Echo" and her sisters will have to go into labor again, parturient monies, &c. Vox. P.S.— The paid up capital of the Bix I banks on . j 31st December, 1894, was ... £6,487,300 | .On 31st Dec. 1874 it was 0n1y ... 4,560,423 j or ... £1*926,877 j less in 1874. But dividing the difference and adding that (£963,438) to. the paid up capital in 1874 the average, for the 20 years of paid up capital may be taken at £5,523,861 and if the dividends paid during the 20 years, the reserve profits set aside, and the value of buildings " - all of which were paid for either out of capital or profits of course) are added £ s d together they total ... 10,778,900 12 6 leavingasurplusafterpaying back capital of ... 5,255,039 12 6 and that surplus is equal t0... ... ... ... 276,193 0 0 per annum during the 20 years, or to 5 per ■ cent, per annum all the time. And they still have the paid up capital, earning dividends, like the brook running "for ever." Verily the community is a milch cow, and we are blessed with the acme system of banking. Vox.