POLICY OF BANKS

Taranaki Daily News, 27 July 1935, Page 5 (Supplement)

POLICY OF BANKS

LOWER LENDING RATES. SIR JAMES GROSE’S DEFENCE. Reference to the legislation of the Government for the relief of borrowers was made by Sir James Grose, general manager of the National Bank of New Zealand, at a Chamber of Commerce dinner in Dunedin on Monday night. In the main, he said, the efforts to alleviate the burdens of the borrowers by way of lower interest rates and writing down capital indebtedness would benefit most the primary producer. As primary production was the foundation of the Dominion’s economic life, he said, its preservation was a matter of utmost importance. “Relief has, of course, been given to private borrowers of all classes through the sharp fall in interest rates,” Sir James admitted, “and the present period of abnormally cheap money is no doubt lubricating the wheels of industry to some extent and easing the position of many long-term borrowers. t “With regard to the legislative interference in private moneys contracts with a view to the reduction and cancellation of debt,” Sir James went on, “my experience has been that the majority of lenders have appreciated the difficulties with which borrowers have been faced during the past few years, and have dealt sympathetically with their debtors in negotiations for readjustment of commitments. FINANCIAL INSTITUTIONS. “In many cases they have written down principal, greatly reduced interest, and even waived it altogether for substantial periods. Therefore it would seem very doubtful whether legislative interference in this direction will facilitate the adjustments which are so desirable. “Certain it is that if repudiation of honourable obligations is to be encouraged, a disservice will be rendered the pastoral and agricultural sections of the community, and rural mortgages will be rendered an unattractive field of investment for private investors. “The inclination to blame financial institutions for the various social ills is common in times of depression, and is the fashion of the moment,” Sir James continued. “The most common of the charges levelled against the banks is probably that of ‘restricting the issue of credit,’ and in this connection one hears much of ‘idle money in the banks’ and ‘costless credit.’ The banks are very willing to lend to any credit-worthy borrower who submits a sound business proposition. “If those people who advocate the freer use of other people’s money—which, in effect, is the essence of the complaints—would but give equal publicity to the comparatively recent experience of the United States of America, where over-daring and unsafe banking was the cause of thousands of bank failures, which swept away the life savings of millions of industrial workers, then I feel sure the people of this Dominion would promptly say, ‘Hands off the banks!’ ” BANKS DOING THEIR DUTY. Sir James concluded by saying: “I submit that the trading banks of this country have done, and will continue to do, their duty. In the past they have granted liberal assistance to the Government in times of national crisis—they have retained the confidence of the peoplethrough keen competition they make available their many services throughout the Dominion at a cost which is lower than in many other countries and which produces a very low return on the capital employed, “I am definitely of opinion that with the Reserve Bank of New Zealand welded as the central link in its monetary system, and the trading banks continuing to offer security and efficient service to the public, this Dominion has a worthy financial structure, which the people will refuse to allow to become the plaything of monetary theorists.”