BANKS IN DOMINION

Poverty Bay Herald, Volume LIV, Issue 16623, 16 April 1928, Page 11

BANKS IN DOMINION

INFLUENCE OF AUSTRALIA THE COMPETITION FACTOR Is it to the advantage or disadvantage of New Zealand that of the six banks operating in this country four should be branches of. Australian institutions? Would not the fact that such a proportion of the banking policy was dictated from Australia tend to link New Zealand closely with the Commonwealth and make conditions here to some extent a reflex of conditions on the other side of the Tasman Sea?

"One could not give a definite answer without knowing exactly what procedure was adopted by the Australian banks with reference to their N.Z. branches," said Professor H. Belshaw, professor of economics at the Auckland University College, when the questions were put to him. "Apparently one of the primary essentials required of a banker is secrecy, so that it is difficult to get all the information that is required to say whether or not conditions of prosperity in Australia would react on prosperity in New Zealand directly through their influence on the banks. The main conditions affecting credit in New Zealand are the state of the London balances and the ratio of advances to deposits in this country." . CENTRAL AUTHORITY URGED

"On general grounds," Professor Belshaw continued, "it would be ad-1 vantageous for New Zealand to have, Australian banks operating here, since i it would enable New Zealand to tap the larger Australian capital resources more readily. Further, although the asociated banks have agreements in respect to interest rates, yet some degree of competition exists in reference to the terms upon which Joans are granted. Prom this point of vjew; Australian competition in the Dominion should be advantageous to business. It is true, of course, that in some small towns there is overlapping and waste, and one bank could readily do the business now transacted by several. The competition between banks, however, is, I think, real, and even if Australian conditions reacted directly through the banks upon New Zealand, the advantages arising from the operation of well-established Australian banks an the Dominion would outweigh the disadvantages. '' Professor Bolshaw said that, to his mind, the weakness in New Zealand's banking system was to be found in other directions. Naturally, the policy of the joint stock banks in reference to the rate of interest and so on was dictated by the interests of the shareholders and only incidentally by the interests of the community at large. In most other countries a central bank was established whose primary duty was to control _ conditions of currency and credit in the interests of the community generally. There was no such institution in New Zealand and the establishment of one was, in Professor Belshaw's opinion, highly desirable. lie suggested that, had such a bank been operating the increase in the overdraft rate last year would have been made much earlier and thus have checked overimportation before it became so serious. As it was, the belated action of the banks had contributed materially in bringing about the depression from which the Dominion was now emerging, ,! '