RESERVE BANK

Timaru Herald, Volume CXXXVII, Issue 19827, 16 June 1934, Page 18

RESERVE BANK

TO SERVE INTERESTS OF COUNTRY BANK OF N.Z. WILL CO-OPERATE Special to ” The Herald ” WELLINGTON. June 15. At the annual meeting of shareholders of the Bank of New Zealand held in ; Wellington to-day, the chairman of ! directors, Sir Harold Beauchamp, in his ' ! speech made reference to the latest banking institution in the Dominion, the Reserve Bank. He said that the ; most important event in banking circles ! | during the year had been the establish- j ; ment of a Reserve Bank. At the pre- • i vious meeting of the Bank the chairman had expressed his views regarding 1 the necessity for such an institution, and he did not propose to make further j i reference to the question. Parliament ! j having decided that a Reserve Bank i should be established, the Bank of New | | Zealand would co-operate in every pos- < I sible way to serve the Interests of the i j Dominion, Continuing Sir Harold | j said: “The Government accounts, which | for so many years have been kept ! j with the Bank of New Zealand, will j | be transferred to the Reserve Bank, j ; but we do not consider this will have i any material effect on the earning > power cf this Bank. Right of Note Issue. “The right of note issue will vest in j ! the Reserve Bank. To redeem their j | existing issues, the trading Banks will j j have to purchase Reserve Bank notes. ! “The Banks hav : also to maintain j | balances at the Reserve Bank equal | to 7 per cent of their free deposits and j | 3 per cent of their fixed deposits. J | Altogether for notes and deposit, the j | Bank of New Zealand will have to find j i for payment to the Reserve Bank i | approximately £7.000.000. Of this j amount about 13 millions will be pro- | j vided. by our gold holdings, and the j j balance by repayment of Treasury Bills out of funds to be remitted from London through the Reserve Bank. “It will, no doubt, occur to you that j the transfer of this large amount into j non-interest bearing assets will affect the profits of this Bank, particularly as the greater portion is now invested *n New Zealand Government Treasury Bills. Profits Will Be Affected. “The loss of this income will cer-« tainly affect our profits, especially if the present conditions of a low level of advances and high level of fixed deposits continue, but as a substantial set-off there will be a saving of note tax (Al per cent) and cost of maintaining our note department, which together have been costing us over 6 per cent on the amount of our notes in circulation—an expensive privilege in these times of low interest rates. “The gold held by the trading Banks is to be handed over to the Reserve Bank in exchange for notes of an equivalent nominal amount. For every sovereign a Reserve Bank £1 note will be received. “You are aware, from newspaper reports, of the Banks’ strong opposition to the proposal that their gold should be taken over at practically half its market value, and you will readily understand that we regard the matter with disappointment and a strong sense of injustice. j “The Reserve Bank, which is to rej ceive £1 000,000 from the Government j for its General Reserve Fund, free of j interest, is also t-o be exempt from j taxation, and it will thus be in a very ; advantageous position as compared with I the trading Banks, which have paid ; both note tax and income tax.”