THE BANK OF NEW ZEALAND.

Waikato Times, Volume XLII, Issue 3433, 30 June 1894, Page 8

THE BANK OF NEW ZEALAND.

A GREAT FINANCIAL CRISIS AVERTED. A GOVERNMENT GUARANTEE GE £2,000,000. EXCITING SCENES IN THE HOUSE. THREE BILLS,PASSED AT ONE SITTING. (by telegraph.-press association.) Wellington, Last Night. When the House resumed at 7.30 p.m., an adjournment was takenfor an hour, to await the message from the Governor in regard to the three Bank Bills of great importance, which the Colonial Treasurer had announced earlier in the day he intended to introduce and pass these through all their stages in one sitting. Meantime the Bills were circulated. They are as follows :~ The Bank Note Issue Act Amendment Bill provides that the provision of part two of the Bank Note Issue Act of last year shall remain in force until the 2nd September, 1894, and repeal the words " and the reserved profits," at the end of the first proviso of section five of the Act. The Shareholders Bill is an Act to control the transfer of Bank shares. It consists of two clauses, the second of which provides that notwithstanding anything contained in any Act dealing with any Bank or in any deed of. settlement of any Bank, the directors of any Bank may decline to register any transfer of shares, upon, which there is any liability made by the shareholders to any person of whose responsibility they may not be satisfied.

The Bank of New Zealand Share Guarantee Bill is to guarantee out of the consolidated fund, a special issue of Bhares by the Bunk of New Zealand to an amount of two million pounds sterling Clause 3 permits the directors of the Bank to increase the capital of the Bank by. the issue of shares to any amount not exceading. two million pounds in shares of ten pounds each, ; upon which there shall not be further'liability. Clause 4 reads; " Such guaranteed shares shall be called A shares, and shall have preference over all ordinary shares in respect both of capital and dividend, arid liability of holders of ordinary shares. Under section twenty one of ■ "The New Zealand Bank Act, 1861," _ these shall be available to secure calling in, payment and cancellation, as hereinafter provided, of such /guaranteed shares and dividends thereon, arid the directors of the Bank may decline to register any transfer of stiareg upon which there is any liability made by shareholders, the person of whose responsibility they may not be satisfied, and every transfer of shares after being approved by the directors sliall' .not be valid until authorised in writing by' the President. Clause 5 empowers directors to call up onethird of £lO per 'share 1 for which shareholders are liable under section 21 of the Act of 1861, and collect' the same within twelve months from the date at which' the guarantee 1 comes into effect, the interest on calls not to exceed ; five per cent. Clause,G says that the Bank shall at the expiration, of ten years -from the date of issue of a share call in and cancel the same on payment of th.e nominal value of the same with' accrued dividends, under clause 7 the dividend on a share is not' to ; exceed four per cent. Clause 8 reads: Every sum of money for which A shares shall be issued under authority of this Act and the dividends thereon shall be a charge upon thein, and in the event of default in respect thereof- by. the Bank it shall be payable out of the Consolidated Fund of New Zealand, without' further appropria tion than the authority, of this Act.,. Clause provides that .in ,the event of default the Colonial Treasurer may appoint a receiver, and Clause 10 says that of the two millions so raised one million pounds shall be at the disposal -i of the bank for uso in .its 1 ordinary business and the ramaining one million pounds, then shall be invented inusuch manner as the. Colonial Treasurer .may. approve. Clause 11 provides'that during the currency of the sha.es no dividend is to be paid without the'; consent of the treasurer. Clause 12 provides that within three months of the issue of guarantee shares (1) the head office of the batik ■ shall be removed to Wellington; (2) a general meeting of shareholders shall be called to meet in Wellington, to elect a new Board of Directors, of whom the President shall be appointed by the Governcr-in-Oouncil, such President need not be a shareholder in the Bank, but shall have and shall exercise all duties,,powers, and responsibilities of a director. The qualification cf directors shall be the holding uf one hundred either of A shares or of other shares of Bank or partly one class 1 , aud partly of other classes. Under clause 13 a special officer shall be appointed as auditor in the Australian Colonies, and the Agent-General of New Zealand, London,' shall appoint an officer in respect of the business ef the Bank in the United Kingdom.,' Clause 14 contains regulations as to audit. Clause 15 says that if from the report of the auditors confirmed by the President, it appears to the Colonial Treasurer that the affairs of the Bankare in any; respect- improperly, or unsafely conducted, he shall call the attention of director thereto, and it shall be imperative upon directors to amend the management and conduct of business in such a manner as the Colonial Treasurer may by any writing require. Clause 16 says in valuing shares held by the Bank in the Bank of New Zealand Estates Company (Limited), or any items which shall take the place of such shores' or any of them, : the directors and auditors shall troafc same as an account in liquidation, and completion of such liquidation such shares or items shall be taken at par or book value ther.of. Clause 17 amends the Deed of Settlement of the Bank so as to make it conform to the provisions of the Act.

' On the House rosutninef at 8.30 p.m., the Bank of New Zealand Share Guarantee Bill was received by a message from the Governor.

In moving the second reading of the Bill, Mr Ward said he was assuming a responsibility which would not have been taken but for the necessity of the case. After referring to the crisis in the sister colonies last year, he said the unprecedented influence in New Zealand had created the lowest standard of value in our staple exports last year. This being followed by a bad harvest, was reflected in the financial institutions, and especially on the bank which held the Government account, and which was still doing a large business in the colony. The Government placed itself in communication with the confidential agent of the Bank, and after mature consideration it was decided that it was essential in the public interest that action should be taken without delay. The Government recognised that no institution was deserving of assistance at the expense of the tax-payers, but the Government did not propose to assist the bank at the expense of the taxpayers. If the Australian Governments had boldly faced the difficulties when they were threatened with them, the crisis which followed would have been greatly obviated. The Bank of New Zealand was practically a national institution, and the Government had to avert a greas crisis. It was found that the bank's capital required enlarging. A measure was passed last year which would have enabled the Bank to do this for itself, but owing to exceptional circumstances obtaining in London the ■colony was unable ta do so. The present Bill proposed that a guaranteed incrsase of capital should be made to the extent of two millions. The Government had desired to reduce it to one-half or less, but the representatives of the Bank had pointed out that this would be inadequate. It would be necessary to maintain the credit outside of the colony, and if only one million were found and utilised the ordinary business credit would end on its exhaustion. The million required for ordinary business was required as advances against produce during the next half year, the other million would be invested as die Colonial Treasurer might approve. The paid up capital fund amounted to £900,000 and with the reserve liability of shares amounting to £1,500,000 must be exhausted before any claim could be made on the guarantee and there Was a cash reserve of £1,400,000. This security was adequate enough. The Bill was to provide against the happening in the future what happened in the past. After explaining the provisions of the Bill Mr Ward went on to say it would be complained that this was the creation of a State Bank and that a State Bank was a bad thing to have. Such. State .supervision and to give the leading Bank of the colony a position similar to that which the Imperial Bank takes in Germany, and which the B ink of France takes in Prance: would •be a good thing for the whole of/the financial institutions of the colony. The House was now asked to decide as'to the good or evil of the colony for.many years to.come. <• Captain Russell said this was an occasion on which it would be recognised that there should, be no attempt to gain a party advantage, but :to approach the question with a grave sense of duty, There was one paragraph, however, in.the Governors Speech which said the position of New Zealand wa3 eminently satisfactory, and he thought it a pity that Ministers, knowing what they must have known, only a week at(o should have pub such words into His Excellency's month. He contended-that no member of the House except those on .the.Gpvernment;bencl)es exactly understood the' nature of the 'Bill; They were asked to guarantee two millions of monoy under the Bill, but he should not withhold his consent, as-to do so might produce a ereat disaster. He had carefully considered the matter, and had come to' the conclusion that the guarantee:by the colony.of two millions of money l was not so Great a disaster as would be caused if the, Bunk of New Zealand had to close'its doors •to-morrow. He thought at the same,time .heavy liabilities would fall on'the taxpayers by this Bill. It seemed to him they were in ereat danger of establishing a State Bank by the Bill, and he was distinctly hostile to a'.-State Bank. He sincerely hoped what they were now doing would prove beneficial to the colony. Mr Geo. Hutchison said- that this was a Loan Bill for two millions, which was not to be used, by .the colony but by an institution, for which £BO.OOO a yoar would have to be paid in interest. He thought the Bill should be referred to a committee, so that it might receive fuller consideration.

Dr, Newman and Messrs T. Mackenzie, Buchanan and Hogg also spoke on the Bill; Sir Robert Stout said he saw no reason whatever for sending the Bill t:i a committee. They had the assurance of the Colonial Treasurer that the Bill was urgently needed, and if the Bill were to pass there was nn occasion to waste any unnecessary time over it.. Mr Sedtlon sail the Government were asking Parliament to accept a grave responsibility by this Bill, but a crisis had arrived which it was nocessary should be met. Ke complimented the Opposition nn the manner in which they had received the Bill, because they had not the information at their command that the Government had. He saw no reason for referring : tiie Bill to a committee. Referring to. Capt. Russell's remarks about the paragraph in the Governor's speech about the satisfactory condition of the colony, he said that at the time the speech was written they had every reason to congratulate themselves on the prospects of the colony, but this present crisis had suddenly arisen. It was for the House, ty passing the Bill, to dispel this cloud. It would be beneficial to the country, and the Government had not taken this step without mo3t careful consideration.

Mr Duihie complained that the House was taken by surprise in this matter.

Mr Bell said the Government were. responsible for the statement that the affairs of the Bank were in the state that they described, and they were also resp :nsible' for the statement that if the Bill did not pass, great ruin would fall upon many people in the colony.' The Government must accept full responsibility in the matter, Mr Ward in replying, said that if the Bill wore delayed till to-morrow morning, as suggested by some honorable gentlemen, then the House would not be asked to go on with it at all, and the responsibility mu«t then rest with those who delayed the Bill. Tlio motion for the second reading of the Bill was agreed to on the voices.

On a motion for the committal of the Bill, Mr George Hutchison moved that the Bill be referred to a Select Committee, and that the Committee should report on it that night, The amendment was lost by 51 to 8, and the Bill ordered to be committed.

Clause 5 was altered so as to make it permissive on ths directors to levy £500,000 of reserve capital at the request of the Colonial Treasurer. The Bill was then reported and put through its final stages.

The Bank Shareholders Bill and the Bank Note Imi? Bill were put thiough all their stages without discission or amend' menc.

The Bank of New Zealand Share Guarantee Bill reached the Legislative Council at 12.40 a.m.

The Colonial Secretary moved the second reading of the Bill. Dr. Pollen objected to ihe Government by a side wind guaranteeing the credit of the colony under the condition as proposed by the Bill He thought it needed no prophet to predict that the prospect of the country ever eetfcing the money the State was called upon to guarantee was an exceedingly sharjey one, but whilst saying this he was not averse to affording assist-' ance to the Bank of New Zealand, Mr Stevens objected to such hasty legislation, and did not like the Bill because the colony would come last in the question of claimants aga'nst the Bank.

Mr Olliver said the Council could not reject the Bill because the result would be disastrous.

(Received at 4.30 a.m.)

All the Bank Bills passed their final stages in the Legislative Council at 4.10 this morning, and will receive the Governor's assent immediately.

The secret about the Bank of New Zealand was well kept and it wa9 late in the afternoon before anything could be ascertained with any assurance, By five o'clock, however, the name of the Bank affected was being freely used. Even the local officials in th« Bank were in the dark as to what was about to happen and heard it first from outsider?. At night the galleries in the House were crowded with people eager to hear what the Government intended to propose.

Mr. Murray has furnished the following memo to the Press Association: " A variety of adverse cmditions which have in the last year or two, more especially in the last year, injuriously affected the producing interests of the colony, have of necessity reflected on its chief banking institution, Shares in the Bank of New Zealand became greatly depreciated in the market and rumours were peisistently put about to the' effect that the situation was unsatisfactory and might have at any tims become dangerously accentuated. Under these circumstinces I recommended to the directors that the Government, be consulted. To this they agreed and asked me to represent them. The Government at once recognised the importance of placing the bank upon a thoroughly substantial footing, and it was determined to legislate to authorise a colonial guarantee to an issue of two millions of fresh capital, all to be paid up. Two millions nine hundred thousand pounds as paid up capital, besides one million of reserve liability still to fall back on makes the' Bank of New Zealand one of the strongest banks in the colonies. The shareholders may rely upon ic that the measure is in their best interests, .as well as of those of the colony. Their shares are now much depreciated, and had the Bank been left to drift worse would have ; followed. I cannot, foresee prices and, seasons, nor_ condition 1 ? which make for prosperity, but t am persuaded that bettor times miistcome. Ihe operation now arranged preserves to shareholders the' entire good-will of their business, which an ordinary issue of shareswould not have done, and while some' sacrifices are, for the present, inevitable, I am confident that the ultimate outcome will be the reinstatement of shares, not merely .to par value, but fc> a premium whereby these sacrifices will be in a good measure recouped,"

[by telegraph.-own correspondent], Wellington, Last Night

' The precincts and galleries of the House are simply rushed to-night by crowds of people who clamoured 'for admittance to the Chamber, but probably not half of those who presented themselves during the evening were able to squeeze into the House and numbers remained in the outer lobbies for a considerable time in the hope of eventually getting in to hear the debate. It had been reported all ovbi' Wellington during the afternoon that a grave financial emergency had arisen which the Government had decided on bringing before the House and asking Parliament to pass a Bill dealing with it at one sitting. On meeting at half-past seven the House presented a most animated appearance, nearly every member being in his place, and the galleries were thronged. The Colonel Treasurer at once rose and said he regretted to have to ask for an adjournment till 8 o'clock, as m unavoidable delay had taken place in the printing of the Bill which he had promised to bring before the House. ' The adjournment was taken immediately, and on resuming at 8 Mr Ward again claimed the indulgence of the House by asking for a further adjournment till 5.30 o'clock, as the message from His Excellency, which was necessary to enable him to introduce a Bill of this nature, had not yet arrived. A second adjournment was then made till 8.30 p.m., when Mr Ward rose and in a lengthy speech explained the provisions of the Bank of New Zealand Guarantee Bill. He assured the House that the Bill was one of the greatest urgency, and he hoped, not only in,the interest of the Bank but also of' the colony at large, that the Bill would pass' through all its stages before the House rose, A lengthy debate ensued. The prevalent opinion during the debate seemed to be-that the question before the House was one of the most serious that had ever come under the consideration of Parliament, Mr George Hutchison's pro--posal to refer the Bill to a Select Committee' only obtained 8 votes to 51,