FARMERS’ UNION

Timaru Herald, Volume CXXXVII, Issue 19374, 24 December 1932, Page 10

FARMERS’ UNION

NOTES AND COMMENTS. (Contributed). CENTRAL BANKING (Contd.). Wiemeyer’s Report to the Government. It was mainly due to the unaccustomed variations in exchange rates. that prompted the New Zealand Government to invite Sir Otto Nlemeyer, who happened to be in Australia to visit New Zealand about September, 1930 and to report on the regulation of New Zealand currency and exchange. In his report to the New Zealand Government, Sir Otto Niemeyer made the following recommendations:—(l) That an Independent Reserve Bank should be set up charged with responsibility for the stability of New Zealand currency, invested with the privilege of noteissue, and charged with holding the Government account aind the banking reserves of New Zealand.' (2) That the note-issuing powers of existing banks being abrogated. (3) That the trading banks should be required to transfer to the Reserve Bank the gold they now hold in New Zealand in exchange either for Reserve Bank notes, with which they can pay off their own notes, or for credit at the Reserve Bank. (4) That the trading banks should be required to keep with the Reserve Bank minimum reserves of 7 per cent, of their demand liabilities in New Zealand and 3 per cent, of their time liabilities in New Zealand.

There is no doubt that such a Bank, if established on the lines laid down in the report, could effectively centralise the note issue, stabilise exchange rates, exercise economy in gold reserves, and generally bring New Zealand into conformity with modern monetary systems elsewhere.

So far the N.Z. Banks have expressed no opinion on the report, the proposals made in which are a bold attempt to establish machinery which will not only stabilise New Zealand currency and exchange on a secure basis, and on a definite relationship with gold, but will also centralise both the note issue and the banking system.

MAIN POINTS IN REPORT. Not only did Niemeyer make the above recommendations, but he also drafted legislation for a proposed Central Reserve Banking Bill, the main details of which were:—

Capital and Reserve (a) The original capital to be £500,000 in fully-paid shares of £5 each, all of which is to be offered for public subscription in New Zealand. (b) The shares to be registered and transferable in the books of the Bank. Without assigning any reason the Bank to have the pewter to decline to accept any person or corporation as the transferee of a share. Powers of the Bank. The Bank may (a) Make and issue bank-notes, (b) Buy and sell gold, and silver coin or bullion, (c) Accept money on deposit or current account without interest, except on Government funds held abroad, (d) Discount, rediscount, buy, and sell bills of exchange, promissory notes, and other paper arising out of bona fide commercial transactions, (e) Grant advances for fixed periods not exceeding | three months against:—(l) Gold coin and bullion. (2) N.Z. Government and Local Body Securities. (f) Buy and sell N.Z. Government or British Government Securities for its own account. (g) Buy and sell foreign currencies, (h) Issue and manage, but not underwrite, N.Z. Government loans and loans of other public bodies in New 'Zealand, (i) Organise a clearing system. (j) Act as correspondent or agent for any bank outside New Zealand.

Prohibitions, The Bank may not:—(1) Issue notes of a denomination of less than 10s. (2) Engage in trade or otherwise have a direct interest in any commercial, industrial or other similar undertaking. (3) Purchase its own chares, or the shares of any other bank. (4) Make unsecured loans or advances. (5) Purchase or make advances on real estate. (6) Pay interest on money placed on deposit or current account with the bank, except that interest may be paid 1 to the N.Z. Government on foreign balances. (7) Grant accommodation to the State, State undertakings, or public authorities, directly or indirect-

ly by way of discounts, loans, or advances exceeding 3 months revenue of such authorities. Relations With the State. — (a) The Bank shall manage, without remuneration, the receipts and disbursements of the State, (b) All accounts of the State shall be kept at the Bank, including the accounts of the Post Office Savings Bank, and all other State undertakings, (c) The Government rhall entrust the bank with all their money, remittance, exchange, and banking transactions in New Zealand and elsewhere, (d) The Bank shall, if requested by the Treasury, manage the State debt, and act as the agent of the Treasury in paying all dividends, interest, allocations to sinking funds, or repayments of maturing securities. (e) The Bank shall be exempt from all State taxes except land and income tax.

Note Issue.—(a) The Bank chall have the sole right of issuing notes in New Zealand for a period of 25 years but the privilege may be revoked at any time if the bank fails to ensure that the value of its notes remains .stable, (b) Such notes are to be legal tender, (c) The Bank shall maintain a minimum reserve of not less than 30 per cent, of the amount of its notes in circulation and other demand liabilities.