"STRATFORD EVENING POST." WITH WHICH IS INCORPORATED THE EGMONT SETTLER. MONDAY, JUNE 21, 1926. LONG DATE LOANS.

Stratford Evening Post, Volume LVIII, Issue 21, 21 June 1926, Page 4

"STRATFORD EVENING POST." WITH WHICH IS INCORPORATED THE EGMONT SETTLER. MONDAY, JUNE 21, 1926. LONG DATE LOANS.

11l his report to thq Proprietors of the Bank of Now Zealand, the Chairman of Directors, Sir George. Elliot, forecasts an important change in the bank’s policy' regarding long-date loans. IT Government authority for the> adoption of the proposal is obtained, the Government. State Advances Department will have compel ition to meet. But it is scarcely to be expected that the Bank will be accorded such favourable terms regarding taxation as now apply to the purely Government lending Department. “It is becoming increasingly evident that the idea of loans that ■a-llow principal and interest to. be paid off by half-yearly instalments extending over a. great number of years, has become popular amongst borrowers both here and elsewhere. Such loans are peculiarly suited to the needs of primary producers as well as • othei classes of the community, “At present this class of business is undertaken mainly by the Government Advances to Settlers Department, which is the largest single money-lending organisation in the country.. On ,31st March last its oxisting loans amounted to £30,000,000 made to over 60,000 borrowers. There appear to be many reasons why the activities of this Department should not be'much further extended. Apart from the political aspect and from tire fact that little revenue by way of taxation is obtainable from the department a« at present constituted, it seems that loans for its extension are not received with much favour in London, while extensive borrowing in New Zealand would have a tightening effect on the local money market, with a consequent tendency to increase interest rates.”

“Considering the question as to the advisableness, or otherwise, of the Bank taking up this class of business, there are naturally important points to 1)0 considered. Perhaps the most important is that it would bo improper for a commercial Bank to lock up any portion of its. deposits, or oven its ordinary capital, in loans extending oyer long,periods. As. Banks have the machinery in existence that would enable them to conduct a lending business of this description more cheaply than any other organisation in the Dominion, the State Advances Department would have a real opposition to meet, and this might result in wider considerations when, dealing with applications for loans. “Mortgages for long terms on the amortisation system are growing in favour throughout the Dominion, and under this scheme it .is proposed that Loans should he granted by the Banx for periods of not more than 36. V years. The Government will, of ■course, have the right to take up one-third of the Bank’s new issue ol Capital, and the ordinary shareholders the other two-thirds.’ 1 This new departure of the Bank should materially improve the Bank’s position per medium of the collateral advantages which should arise from kmg term loans. But in the unlikely event of no advantages accruing the profit-earning power of the Bank as a whole will be sufficient to pay clivw deads on the existing capital at present rates, as well as 7£ per cent-, on the new capital. Power would be taken to enable the Bank to pay off at par the whole or any part of thus special new capital should the scheme not be as successful as it was expected. to be.