THE BANK BILL.

Poverty Bay Herald, Volume XL, Issue 13172, 4 September 1913, Page 7

THE BANK BILL.

NEW LEGISLATION INTRODUCED

STATE CONTROL UNDIMINSHED

THREE MILLIONS OF NEW CAPITAL.

IMPORTANT DEBATE

'From our Parliamentary Reporter.) ' WELLINGTON, this day. Upon the introduction of the Bank of New Zealand Bill by Governor's message, the Minister of Euiance gave an outline of the more important proposals contained m the measure. Mr Allen explamed that among other things it was proposed that the Government and guaranteed stock .should be continued, and that provision be made for the redemption of that stock, if necessary, within twenty years. It was also proposed to retain the present proportion of shares as between the Government as shareholders and the other bank shareholders, while m the event of any increase of interests the Government interests will be increased m ratio. The bank was empowered to create and issue further capital stock to the extent of one million pounds sterling, having a. currency not exceeding twenty years, and carrying a dividend at a rate not exceeding 4 per cent, per annum. It was proposed also to create B preference shares, and to remove the 10 per cent. inten3st limit. Any new shares ; ssued to shareholders would be issued .it a premium, but it would not be fair to allot the State 10 per cent, dividends upon the value of its shares, less the premium, which he believed would be fixed at 50 per cent. It waa also proposed, said the Minister, to allow the Bank to increase its capital. The maximum amount of increase provided for m the Bill was £3,000,000. He did not' suppose that £3,000,000 would be issued hi once, and the Minister of Finance was accordingly to be consulted before fresh capital was raised. The idea was that, as necessity arose, fresh shares would be issued to increase the Bank's capital, the limit being £3,000,000, which might not be reached for many \ears. Power was given to the Crown, added the Minister, to purchase B preference shares, and not till the Government had declined would the other shareholders have the right to take them up. Tlie right of veto would remain as it did at present, while the directors also remained m the present proportion— four - Government and two shareholders' directors. Those, said Mr Allen, were the more important proposals. FURTHER DETAILS.

In addition to the matters explained by the Minister, the Bill shows that such of the B preference shares as are held by the Crown shall confer no right to convene, vote at, or otherwise take part m any meeting of the proprietors of. the bank. In the event of the wind-ing-up or the dissolution of the bank, the assets thereof shall, after payment thereof of all liabilities of the liank m making its capital stock, be applied — firts, m repaying the capital pipdd up on the A preference shares; next m repaying the price paid for the R preference shares (including any premium paid to the bank before the issue thereof), and the balance shall belong to the holders of the ordinary shares, m proportion to the capital paid up thereon. CHIEF AUDITOR'S VETO.

The chief auditor and assistant auditor may attend directors' meetings without voting, and the chief auditor may> by memorandum recorded m the minutebook containing the record of the pro oecdings of any meeting either at such meeting or thereafter, suspend the operation of any Act or proceeding of such meeting until after the expiration of 28 days from the date of such meeting, and may by a like memorandum remove any such, suspension. Tho remuneration of the directors is to be increased to a. total of £4000, double the present amount. It is also provided that a proxy-holders' limit shall be increased from '/SO to 2COO shares.

THE BILL DISCUSSED. Sir Joseph Ward pointed out. that there had been considerable diversity of opinion between the enrolment directors and tlie sliareholders' directors. it would therefore be very important to hear the Minister's assurance that tne directors were agreed m the proposals m the Bill. The shareholders had. the right to proper representation, but at i thti same time believed that the board as at present constituted was on the whole th* best thing. He presumed also that: a maximum pf interest would be set at' whioh the bank would be authorised to borrow money or renew that million of money. Otherwise, if by any chance the bank paid a much higher rate, it would very quickly . react on the public. "1 understand the hon. gontleman to say also .that the Government shares are to be increased m similar ratio to those to be put on the market," added Sir Joseph.

The Hon. Mir Allen : Yes, the present holding of the bank, including the uncalled capital. Sir Joseph Ward : If you remove the limitation of 10 per cent, interest upon which dividends are to be paid, and you put m no maximum, then it suggests itself that there might be a tendency hereafter to* pay an abnormal rate of interest on the class of shares concerned. I also want to say that it is a very moot point to my mind whether this country, which has £500,000, I believe from memory, invested ?n this bank, because at a critical period m the bank's history the country came to its rescue, should not be entitled to consideration. I think it is a matter for the , Government to consider very carefully before agreeing to pay a 60 per cent, premium m the shares to be allotted to the country. As to the increase of nominal capital, it looka to me that it would be a better thing to have a much larger capital than the hank intends to raise if it is not intended to raise it for a period of years. The institution, added the speaker, was a. very strong one. It was exceedingly gratifying to realise m retrospect that, not one penny piece of loss had been incurred to this country, and that all the ascertained losses had been wiped off. SOME TRENCHANT CRITICISM.

In the course of discussion, Mr Myers expressed the opinion that it was only right the House should be approached on any occasion the directors «iight .desire, to increase tneir capital. Tho Hon. Mr Millar declared that the Government were fjoing directly baickon the existing arrangements. He contended, moreover, that the proposals m the Bill were not the directors' proposals. The Government at present practically owned half the bank capital. Hon. Mr Allen: No, no. Mr Millar: The Government owns £500,000 of capital. Whose money created the reserve fund? During the first ten years after 1894 five-sixths of the whole money was found by the State, and m the last ten years three-fifths of the money belonged to the State. It is the first instance m which a half-partner could say to the other half, "You must go out." If £3,000,000 of new capital is to be brought m, the State ought to have £1,600,000. I notice, also, the B preference shares calling 100 per cent.

premium. , ,_„ Mr Allen : No, not greater than 100, but not necessarily so great. Mr Millar : It is a shareholders Bill. We are just going to hand the bank over to the shareholders. Those B preference shares, if held by the State, don't even hold a vote. I hope before the Bill goes through this House it will be very materially altered; otherwwe 1 shall fight it tooth and nail. We have no right to give the shareholders a present to which they have no title. (Hear, hear). MINISTER'S REPLY. In reply the Minister of Finance stated that the maximum capital was fixed at the vride margin of three millions sterling, because he did not think it wise to continually bring the bank's affairs upon the floor of the House every time it wanted a fresh million. It was not m the interests of the bank or tho community that <the matter should be squabbled over m the House when fresh capital was wanted. He could not agree with the member for Dunedm Central that the proportion of State to shareholders' interests was as one to one. It was perfectly true so far as paid-up capital was concerned, but the shareholders were liable for another half million, so that their proportion of interest was as 2 to 1. There was an under-

standing that the State would take up its full shaTe of the B preference shares of the new issue.

STATE BANK PROPOSITION

He was not prepared to discuss a State Bank. It <vas better to get the present matter out of the way first. If any Government considered it advisable m ;the future to .-itart a State. Bank let it start on a clean issue and a itew platform. The State's hold, however, over tho Bank of New Zealand was sufficient to prevent speculation m landed securities. He admitted that the original shareholders had suffered severely, and unfortunately it was impossible to benefit them by giving priority, because most ot them sold out. >. i

Mr Myers : Only one-fourth are left. The Minister: Yes, a small proportion. He pointed out that many of the original shareholders parted with their holdings at as little as twopence. Some even for nothing. Therefore he asked what right had the bank to hand over to the new shareholders the new issue without premium ?

The Bill was read a first time, and it will be read a second time pro forma to-morrow m order to refer it to the Publio Accounts Committee.