Banks and Banks.
The Times of Ist May, writing upon tbe banking crisis in Australia, made tbe following remarks “ The public should, however, be on their guard against the tendency to unreasoning panic, which has shown itself during the last few days. It is, no doubt, difficult for people who know very little about the city, and even less about Australian affairs, to understand that the term “ bank " is applied in Australia to various corporations which would be more correctly described as land mortgage companies, as well as to the few real banks which exist there. Companies of this kind are indispensable to a new country, and if properly managed are a source of profit to their proprietors, but they cannot safely employ as large a proportion of the money at their disposal as banks in London, or other places where it is comparatively easy to employ money for short periods. Here banks keep on the average about 12£ per cent of their liabilities in cash, another 10 to 12 per cent in loans at call or short notice, and another 15 per cent or so in investments on which money could be borrowed easily. In a new country some of these modes of employing money safely do not exist at all. In addition tbe contents of the London banks’ bill cases are presumably falling due and being paid daily, while good banks bills are, for various reasons, not easy to get in Australia. Of coarse, if the London bank invests an excessive amount in long-dated paper or allows a customer to become its debtor to an extent beyond his real means it may bo in no better position to stand a run than the Australian banko which have lately failed. As we remarked a few days ago, these Australian banks not only borrowed too much money but paid too much for it, and this unfortunate error drove them in turn into lending too much at rates which were too high for safety.”
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Bibliographic details
South Canterbury Times, Issue 7270, 25 July 1893, Page 3
Word Count
333Banks and Banks. South Canterbury Times, Issue 7270, 25 July 1893, Page 3
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