BANK OF NEW ZEALAND.

Star (Christchurch), Issue 5349, 29 August 1895, Page 4

BANK OF NEW ZEALAND.

REPORT BY THE SPEOIAL COMMITTEE, FURTHER ASSI3TANCE BY THE STATE.

We are indebted to tbe Government for ■the following copy of the report of the Parliamentary Committee on tbe affairs of the Bank of New Zealand, laid on the table of the Houbo ye_terday afternoon : — The committee appointed to inquire into and report upon the Bank of New ..ealand Estates Company, and its relation with the Bank of New Zealand, to inquire how, in the colony's interest, the two institutions can best be separated, and how the earniog power of tho Bank of New Zealand may be increased, its stability insured, and its usefulness extended, have the honour to report as follows : — Before proceeding to investigate the several matters referred to it by both Houses of Parliament,, your committee reoeived from the Colonial Treasurer the following letter addressed to him by the Direoton of the Bank of New Zealand, . whioh explains why Parliament has been called upon to deal with the question :— *' Bank of New Zealand, Wellington; August 17, 1895. — Sir, — I have the honour to quote for your information the following . minute paasedby the Board of the bank. At a meeting held tbis morning of the Pari .. liamentary Committee, to inquire into the ■ affairß of the Bank of New Zealand Estates Company and the Bank of New Zealand, with a view to separating the Estates j I Company from the bank, and increasing the earning power of the bank, it was . resolved to place on record that it waa the -. desire and expressed wish of the direotors, '■ made at a conference with Ministers, that this Committee of both Houses ahould be appointed— l have, &c, W. Watson, President." Yonr committee has, since its appointment, been continuously and carefully engaged in going into the several matters referred to it, and has had before it the president of the bank (Mr Watson), all the directors of the Bank of New Zealand, the auditor of the bank (Mr Butt), Mr Foster, the general manager of the Estates Company, Mr Lyon, until recently employed oa manager of several . of the properties^ the Estates Company, Mr M'Kerrow, Land Purchase Inspector, • and Mr M'Gonan, Commissioner ot Taxes. • -your committee has had before it the - balance-sheets of the Bank of New Zealand, the balance-sheets of the Estates Company and of the Auckland Agricultural Company, the combined balance-sheets and statements concerning the business of the bank and of the Assets Company, whioh are appended to the report. Your committee finds that the present directors of the bank are not responsible for the present unsatisfactory condition of affairs. The committee considers that the present direotors have acted efficiently since they took office, and have candidly and fully . given every information to the committee, There is a deficiency of .£376,900, and a contingent dependency of £200 000 in the bank. There is a deficiency of £467,077 in ■ the Estates' Company, against which no assets exiat, and a further defloienoy of £444,601 Id trading concerns and pro- . perties outside New Zealand. These altogether amount to £1,488,578. Of thiß sum -8148,110, though shown as a liability, is really a debt due by the Agricultural Company, and represented by assets. Deducting thiß from the aforesaid sum of £1,488,578, there remains -61,340,468. This ia provided for as follows :— Capital of the Bank £900,009, estimated amount Of call £450,000, total £1,350,000, leaving a balance of £9532, which goes to a dependency acconnt. Your committee is of opinion tbat in tbe present financial circumstances of the colony, and taking into consideration the financial position of the Australian colonies, and also considering the magnitude of the interest-, both public and private, which are involved, as well as the widespread disaster that would follow should the Bank be compelled to suspend operations, the colony should render snch assistance to tbe Sank as -will restore confidencs, insure stability, and enable ifc to carry- on its business in a satisfactory and profhrftble manner. The committee is of opinion that any assistance Bhould be of an effective and definite character. In support of the committee's opinion, it may ba Btated that it has been found that,, apart from any indirect injury to the country, tbe following interests would be directly affected by any disaster to tho Bank, cs will be Been from returns annexed. There were on March Sl, 1895, in New Zealand, the other colonies and London deposits in the Bank of New Zealand to the number and amount aB follows:— Depositors. Deposits. £. New Zealand ... 35,110 5,032,900 Other colonies ... 2,839 530,223 London ' 3,351 1,578,632 Totals ... 41,300 £7,141,755 This includes Government deposits amounting to £1,145,396. The total number of advances by the bank on March 81, 1895; and the amount of same in New Zealand, the other colonies and in London, were bb follows :•— Advances. Amounts. £. ■ New Zealand *... 15,593 5.428,222 Other colonies ... 1,277 1,463,516 London ... 137 800,915 Totals ... 17,007 £7,192,653 ' The shareholders in ■ New Zealand number 1050, liable for £403,000. There are 115 branch banks, and 28,584 current accounts. Tbe discount aocount, representing traders'; acceptances, equals £456,000. The colony of New Zealand, independently of the " A " stock, £200,000, 9m4^je-__i_t_-nceß.;_miran.itM,jß, creditor to the bank for £1,403,000, the amount in New Zealand being £453,000, and in London £945,000. From the evidence taken, and the balance-Bheets submitted, it will be found that the Bank of New Zealand and the Estates Company, though two in name, are practically one institution ; thnt the Estates Company and the Auokland Agricultural Company, though under different names, are practically one concern; and that the combined Estates Company, Auokland Agricultura^om-pany and Bank of New Zealand, are practically one concern. The division is in name only, because the whole of the shares in the Estates Company are owned by the Bank of New Zealand, the only interest held outside the bank being by the debenture-holders, who recently acquired five hundred thousand pounds' worth of tho debentures previously held by Baron Schroder, and the debentureholders of the Auckland Agricultural Company who hold £282,960 worth of debentures. Your committee ia of opinion that it would be in the best interests of the colony, of the shareholder's ©£•' the Bink of New Zealand, and of all concerned, that a separation o_ the affairs of tbe Bank of New Zealand

So_-P deterred maketh the dirt stick. Try Silketone. - 1707 A Des Moine.s woman who had been teo b bled with fik<_nent colda, concluded to try «n old remedy in a new way, and accordingly took a tablespoonf al (four times the u-nial deTe)?bf Chamberlain's Cough Kemedy juab before going to bed. The next morning she found that her cold had aknof-t entirely disappeared. Dariog the day ehe took a few doses of the remedy (one teaspoonful ac a time) and at night again lock a tablospooaful before going to a?d, »-i-*i ou the following morniga awoke i!ceo fro: i all symptoms of the oold. Since then ci.a has, on several occasions, nsed this remedy in like manner, with the same good results, and ia much elated over her discovery of so quick a way of curing a cold. For sale by Wallace ahd Co., CiifcUUEiS, Cliri-tcfcurch, '

and the Estates Company should take place.

In dealing with so momentous ahd intricate a question, it iB necessary that every precaution Bhould be taken to safeguard the colony against losses, and to render future application for the intervention of Parliament unnecessary. To effect this, your committee recommends that the whole of the freeholds, leaseholds, stations, Btook and implements in New Zealand be disposed of, and that the Bank of New Zealand Estates Company sell them to a Realisation Board to be established for that purpose. That an Assets Eealiaation Board consisting of three members be created aa hereinafter provided. That the Assets Realisation Board be authoriaed to issue bonds for £2,734,000, bearing 3_ per cent interest, and that the deficiency, if any on these bond., after the realisation of the New Zealand Estates Company's properties, be guaranteed by the colony to the bank; in return for these the Bank of New Zealand, the New Zealand Estates Company, and the Auokland Agricultural Company to transfer ths whole of the property referred to to the Realisation Board for liquidation purposes. That £500,000 of uncalled reserve liability of the Bank of New Zealand shareholders be called in four equal instalments, the first being payable on June 80, 1896, the second on December 31, 1896, the third on Jane 80, 1897, and the fourth on December 31, 1897. That, to encourage the shareholders of the Bank to meet the call of £500,000 proposed to be made, your committee recommend that the. firat charge on all annual profits of the Bank beyond .£30,000 per annum should be, a payment of interest not exceeding 6 per. cent, on the amount naid. by the shareholders on the call as aforesaid. That the Bank of New Zealand, out Of its profits, pay to the Assets Eealiaation Board the sum of £50,000 per annum as hereinbefore mentioned, and any further sum whioh may remain after paying 5 per cent to ordinary shareholders, until any deficit on the realisation is provided for. Your committee is of the opinion that the last valuations of stations and landed pre* perty may under favourable circumstances be maintained, but the more prudent course would be to allow for further depreciation. That to insure the colony against any loss on account of guaranteeing any deficiency that may arise on bonds, in addition to the payments from profits above provided for, security be given over the freeholds, leaseholds, stations, stock and implements in New Zealand, the Bank's latest ascertained value of which ia £1,879,000, and over the second call of £500,000, and also over the balance, £500,000, of the uncalled reserve liability of the Bank shareholders; that the firßt call, the last payment of which is due on Nov. 26 next, estimated to amount to £450,000, together with the present paid-up capital, amounting to £900,000, be written off to provide for losses, of which £1,150,000 iB for ascertained losses, and includes £9558 which is proposed to be held as a dependency, and £200,000 as a contingency for unascertained lobs.

In conjunction with thia proposal, and to enable adequate oapital to be provided for the bank to carry on ita business and restore its credit, -your committee recommends the colony to subscribe £500,000 for preferential shares bearing 3£ per cent interest, and that tbey be paid for by the issue of 3i per cent stock to the bank; the bank to have the right to purchase any or all of these Bhares, provided- that they are cold the present bank shareholders to have priority. This, with the £500,000 of capital from the second oall of the reserve' liability, will give the Bank of New Zealand a clear capital of £1,000,000 sterling. In addition to this, .the position of the bank will be strengthened by having the whole of the £2,000,000 of "A" stock for uae in ita ordinary business. Under the altered position that the bank will occupy, these proposals, if given effect to, will put it on a sound basis. On investigation, your committee ascertained that the seoond million of "A" stock, now invested according to law in liquid securities, entails a heavy annual loss on the bank. To prevent this recurring loss, and in order to increase the earning power of the bank, your committee recommends that the million be freed and made available for use in the bank's general business; and to farther enable the bank to increase itß earning power, yoar committee is of opinion that the bank Bhould be at liberty, if deemed advisable, to secure further trade by purchasing other banking business, but that no purchase be allowed unle_B with the sanction of the Governor in Council, and that to enable this to be done, section 3 of The Banking Aot, 1894, be repealed; and further, with a view of increasing the earning power of the Bank, the committee recommends that the colony's business in England be transacted by the t Bank of New Zealand. The directors' of the Bank are of opinion that if these recommendations be given effeot to, the net earning power of the bank will be so increased as to leave a profit of £135,000 per annum. That in consideration of the £500,000 preferred shares tor be taken up by the Government, the colony ehould have further representation, and that the Governor in Council be empowered to appoint one director. That the Assets Realisation Board shallconsist of three members, and inasmuch | aa'th,e colony has guaranteed the deficiency, if any, on the bonds to be issued by ' the said Board, the Governor-in-Council I phall appoint two members, and the Directors of the Bank of New Zealand one member. The committee is of opinion that the shareholders of the bank should be prohibited by law from winding up the bank until the whole of the obligations to the colony are repaid. This is. - an r obvious preoaution,considering the large responsibilities of the bank to the colony. Tha committee also recommends that the power. under "The Bank Guarantee Act, 1894," be amended, so that the power to appoint a Receiver shall arise on any default of the bank. The proposals of the committee deal only with the landed properties, stations, stock, implements, &c, in New Zealand. The trading concerns both in and outside New Zealand, and the properties owned by the Estates Company outside New Zealand are not to be transferred to

the Assets Realisation Board. The directors of the Bank of New Zealand have informed the committee that the latter properties may be realised in two years. The directors have so far written down in value that the committee is of opinion that there need be no delay in carrying out those immediate realisations. The details of the trading concerns have not been appended, as they are for sale, and it would be inadvisable to farniah all the details connected with them. With the papers appended to the report will be found a scheme submitted by the directors of the Bank of New Zealand. The committee did not see its way to accept it, seeing that it entailed heavy obligations upon the colony which the circumstances of the case did not warrant. The Colonial Treasurer also anbmitted a scheme, the distinct feature of which was that the colony did not directly issue stock to the bank aB against the assets of \ the Estates Company, but in lieu thereof, as a last resource, the colony guaranteed the defloienoy on the bonds. Sir Robert Stout alao placed before the committee certain resolutions. These will be found with the papers appended to the report. Chaeles C. Bowen, Chairman.