CENTRAL BANK BILL

Wanganui Chronicle, Volume 76, Issue 243, 14 October 1933, Page 9

CENTRAL BANK BILL

BANKS AND THEIR GOLD AN OFFICIAL STATEMENT. WELLINGTON, Oct. 13. As di closed in the statutory bank returns for tho quarter ended September last, the banks held some £5,000,000 in gold coin and bullion. They hold that this is their property. It occupies a place of some importance in the discussions around the proposed central bank. With the object of ascertaining the banks’ views n this question a representative of The Post waited on the chairman of the Associated Banks (Mr. J. T. Grose) and asked him if he would enlighten the public with some facts bearing on this question. He explained that when the Reserve Bank Bill was first mooted the Prime Minister (Mr. Forbes') agreed that the proposed Bill should be discussed with the banks—who though some, of them were opposed to a central bank—had agreed to assist the Government in seeing that the Bill was drafted on the best possible lines. As a result of this, small committees were appointed by the Government and the banks. Those committees went through a preliminary Bill in detail and made recommendations to the Government. Although agreement could not be reached on one or two major points, the Bill was drafted. Following on that, the heads of all the banks were invited to meet Cabinet, and the whole matter was again discussed. “Much discussion,” said the chairman, “took place in respect of the true value of the gold held by the hanks. This gold is held largely against the note issues of tho banks, but also substantially as a reserve in the ordinary course of their business, and quite apart from the requirements of their note issues. Property of the Banks. “The banks held that the gold was their property, and the true value of it. of course, was their also. “As is recognised at law. all gold and silver paid into a bank becomes the absolute property of tho bank, and those who pay it in become depositors, and have a claim against tho banks as their debtors. Conversely the deposit of gold or other currency by the customer might reduce his overdraft and so reduce the bank’s claim as creditor against the customer as debtor. “No satisfactory conclusion between the Government and the banks was then arrived at in respect of this matter. “Many meetings between the heads of representatives of tho banks :nd tho Finance Minister and others followed, and in the end, though tho banks did not in any way depart from their claim that the true value of the gold held by then: belonged to them, it was agreed tha’ a clause should be put into tho Bill under which the contention of tho banks was sot out; and it was also set out in the Bill that, having regard to all the circumstances, it might bo contended that the Reserve Bank or the Government would be equitably entitled to a proportion of such value. 'l’he clause also provided that, on realisation, the value of any gold coin transferred to the Reserve Rank by any bank, ‘shall be credited to that bank or apportioned between that bank and the Reserve Bank, as may bo agreed between the Governor of tho Reserve Rank, and tho said bank.’ Failing that, the question to be determined by others mutually agreed on hy the bank concerned and the Governor of the Reserve Bank; and failing that, by a special tribunal comprising the Chief .Justice of New Zealand and two other persons. “This clause was arrived at. as stated after, very many consultations and discussions, and was incorporated in the Bill. The Rill was introduced into Parliament last, session, but it did not then get. beyond tho first reading. What the Banks Learn. “The banks now learn that there have been deliberations by the members of the Coalition Government and that an amended Rill will be introduced shortly. It has been stated on behalf of the Government —(see The Post of October 7) —that even if any possible changes should prove necessary and desirable in the Bill it would remain sub stantially as first presented, so far as general principles are concerned; and also that there were to be no major changes in the method of working of the Reserve Bank. “This would seem to dispose of reports that have circulated recently, that it was intended to have a majority of Government-appointed directors, or even that the Government should provide the capital for the bank in lieu of subscription by private shareholders. “But, as stated above, the banks hold that their gold, with its true value, is their property. “It is not generally known that a great deal of the gold coin imported into New Zealand by the banks and held by the banks has never been in circulation, hut has been retained in the banks’ safes. It may also be explained that much of this gold thus held has been received in exchange for bullion purchased in New Zealand by the banks. “There is another factor, too that is not generally known, ami that is that until recent years settlements of exchanges between Australia and New Zealand were frequently made in gold.”