BANKING POLICY AND THE EXEXISTING MONETARY PRESSURE

Wairarapa Daily Times, Volume 2, Issue 173, 31 May 1879, Page 2

BANKING POLICY AND THE EXEXISTING MONETARY PRESSURE

[ Lyttloton Times,]

A perusal of the bank returns for the 1 quarter ending March 31 last, discloses I results for which wo had not been quito : 'prepared, We havo heard much of the 1 tightness of monoy, and the consequent public inconvenience, caused by the restriction of bank accomodation—a policy ascribed to all the banks, but'in which, for some reason, the Bank of New Zealand has been supposed to be foremost, We did not ourselves believe that this bank had so entirely departed from its traditional policy, but concluded that even a prudent and necessary check to its advances were severely felt by reason of the large business of the institution and its usually liberal policy. This opinion is more than .borne out by the bank returns, which shows that in the March quarter the three foreign banks, as they have been called, have reduced their advances by L 130.000, while the bank of New Zealand has increased its accomodation to the public by L 179,006, the National Bank having also increased its advances by L 120,000. This we think is a circumstance of much significance, as tending to confirm a prevailing impression that in a time of difficulty and pressure the interests and wants of the Colony are likely to receive greater consideration from institutions locally controlled, than from those which must carry out a policy dictated from abroad, As we expected we fail to discover from these returns that existing. monetary pressure is in any degree caused by tho action of the banks as a whole; restriction by the foreign banks-being more than compensated by increased facilities, allowed by the local institutions, The causes of the tightness are easily to be found in tho reduced value of colonial products—a deficient harvest—and last, but not least, in the rashness of many people who have incurred obligations which they have not the means, nor the credit, to meet, and who naturally seek to fix the blame anywhere but on themselves, To these causes we might add tho check to the How of money for investment in the Colony., caused by the late financial crisis in England ; and the failure to organise new lending companies to be channels for such investment in proportion to the rapidly increasing wants of the Colony, While looking on this subject we have endeavored to find out how far the banks themselves suffer from the scarcity of money which affects so many of their constituents. The quarterly returns do not adequately supply this information, as they deal only with cash resources actually held in New Zealand ; nor have we been able to lay hands on balance-sheets of late date of all the banks, We find, however, that at their balanco on March 31 last, the Bank of New Zealand showed Coin and casli balances £1,755,000 Bullion 197)000 Government securities (529,000 £2,551,000 The Union Bank shows as at December ill last Specie on hand, and cash balances £1,240,000 Bullion 141,000 (jovmnent securities 387,000 £1,768,003 Tliu Bank of New South Wales shows as at March 31 lastsCoin and cash balances £2,058,000 Bullion 272,000 Government securities Nil. £2,930,000 Each bank having special liabilities for Government deposits, These, in the case of the Bank of New Zealand, would appear by the quarterly returns to be £809,000; but as this figure represents the average of the quarter, the amount at March 31 is no doubt much less. As regards the liability of this bank to make advances to the Government, it is significant that the bank is already holder of Government securities to the extent of £029,000, which, for anything that appears may in fact cover all the advances it may be called upon to make; The liability of the Union Bank to the Queensland Government was, at the time, probably nil, but they are holders of £150,000 New South Wales Government deposits. The Bank of New South Walos appears at the date of its last balance to have had . £1,200,000 of Government deposits. Estimating the liability of the bank of New Zealand on Government account at the date of its balance at, say £500,000, the resources of the three banks in cash, bullion, and Government securities, less Government deposits, would stand thus:— Bank of New Zealand £2,050,000 Union Bank 1,810,000

Bank of New South Wales ... 1,630,000 We do not pretend to go exhaustively into the finance of aflyono of these banks; the figures available to the public do not all'ord the means of doing so conclusively; while any attempt of the sort might be an injustice to one or other of tliem, and create interminable controversy. It is enough that we can see nothing in the position of three of the leading banks trading in this Oniony, which is otherwise than reassuring, and calculated to inspire confidence. In this connection, and as an instance of Government financial policy, the action of the New South Wales Goverment js noteworthy. Having some three millions on deposit with Iho Sydney banks, they nevertheless have just raised a loan of over three millions. The reason given, as wo believe, for this rather singular procedure is that it would bo highly inconvenient for the banks, and therefore dangerous to the Colony, were they at present called upon to repay this money.