BANKING CONTROL

Poverty Bay Herald, Volume LXIII, Issue 19135, 2 October 1936, Page 14

BANKING CONTROL

AUSTRALIAN INQUIRY "EXCHANGE MONOPOLY" ALLUUEI) TO \\\>] UNSOUND SYDNEY, Sept, 25. Declaring that the suggestion that the Commonwealth I'ajik should aim at complete control of exchange bv taking over die London funds of the trading! hanks >vas unsound in principle. .Mr. <'. Darvall, general malinger of the Commercial Banking (' pany of Sydney, Limited, in evidence before the Banking Commission yesterday, said that such extreme power would act as an impediment to iiisiiiess and trade generally. II would lead ultimately,' he said, to •olitrol of imports ami exports with the inevitable evasion and the growth of an iflicial exchange market. "The results of the numerous national controls of exchange, which have nearly Jii'ollled world trade, together with their irritating formalities and restrictions, are sufficient warning," he added. "The whole idea is repugnant to the British temperament. The holding of sufficient oversea funds by the Central Bank is, of course, an important: factor hi carrying out its policy regarding! the "■sternal value of the currency, and it amy usefully operate in the exchange market for the purpose; but it is not its function to monopolise exchange. "SERVICE BEFORE PROFITS" "Contrary to the theory submitted to die commission, that exchange profits dictate banking policy," said Mr. Daratll. "it is the fact that a trading bank must give service, and to protect its loiuestic business, which is essential to ,ts continued existence and expansion, mist meet the oversea requirements of .ts customers. The whole course of ransactions in recent years bears out the tact that service before profits in exjhange was the policy of the hanking system. 'if the Commonwealth Bank assumed onlrol of oversea funds we should suffer oss of income for which we might not be able to recoup ourselves." Mr. Darvall said that the trading

anks provided tin? life-blood of the inlustries of the nation. The claim of the ( ommonwealfh Bank to be the sole banker for Governments ind semi-Governmenl authorities, ho said, was a request for a monopoly,

vhich also concerned the subject- bodies. His bank acted as bankers to the New ~'out!i Wales and Victorian Governments ind many shires and municipalities. The Government accounts did not afford a lucrative source of profit. On the contrary, if was often doubtful whether the hank received sufficient revenue to rover the cost of the services rendered. Mr. A. C. Davidson, general manager if the Bank of Kew South Wales, gave ■vidence in relation to the credit base, the relation of advances and deposits. ind the creation of credit. In Australia, he said. Treasury bills

were the means by which monetary expansion was employed to overcome the lepression. It could not be said that we wci\' experiencing boom conditions now. We were nearly back to normal, but the Central Bank should move warily in any measure to check business expansion. Dealing willi the credit base, Mr. Davidson said that, during a certain period, the total amount of advances '/ranted to the community might, have

been £200.0C0.C00 against a credit base of £SOO.COO.CCO. Mr. Davidson said that it was the

duty of the Central Bank to estimate the credit base, determine its policy, and * direct the banking system accordingly.