CENTRAL BANK.

Waikato Times, Volume 112, Issue 18808, 2 December 1932, Page 7

CENTRAL BANK.

INTRODUCTION OF BILL. EXPECTED IN A FEW DAYS. TRADING BANKS’ POSITION. WELLINGTON, Thursday. It is now revealed that one of the main questions in dispute between the Government and the hanks in the proposal to establish a Central Reserve Bank, relates to the price at which the Government will take over the banks, gold reserves. Under the provisions of the Central Bank Bill, the six trading banks m New Zealand will be required to transfer to the reserve bank the gold they now hold in the Dominion in exchange either for reserve bank notes, with which they can pay off their own notes, or for credit at the reserve bank. The average holding of gold coin and bullion by the banks dl ' riD » “l 8 quarter ended September 30, * was £5,605,426, as compared wut.i £6,942,332 for the September Quarter of the previous year, about £1,300,000 having been shipped to London in t e meantime. ~ . It is understood that in their negotiations with the Government concerning the formation of a reserve bank, the trading banks have stated •that they will transfer their gold reserves at about £6 an ounce, the ruling price. As against this, however, the Government has stated that gold Was no value until it is exported, and for this reason it is not prepared to pay more than £3 17s 6d an ounce. At the moment it is stated there Is no prospect of the question being settled and the suggestion has been made that a special tribunal should be set up to decide at what price the reserve bank will take over gold coin and bullion. In spile of failure to agree on this important point, the Government Is determined to introduce the bill within the next few days.

State Bank Not Favoured.

At to-day’s caucus, there was some talk of a 'state bank, but members w’ere generally agreed, after hearing the lU. Hon. J. G. Coates, the Hon. W. Downie Stewart, and the Prime Minister, the Rt. lion. G. W. Forbes, that a central bank was the right institution to possess the sole right, of note issue and to hold responsibility of stabilising New Zealand currency. This bank will hold the Government account and the banking reser\es of the Dominion. Some suggestion has been made in the lobbies that the Government should control exchange through the central bank. It was emphasised strongly by Sir Otto Niemeyor. upon whose proposals the present bill was framed, that one of the fundamental conditions upon which any such bank should be established was that it should be entirely free from political control, and it seems likely that the Government will follow' this out. Under Sir Olio Niemeyer’s proposal, exchange would, be controlled by a currency and exchange board. Such a board would undertake to buy and sell exchange within the gold points. If exchange showed signs of weakening in London, the New Zealand office of Hie board would offer to sell exchange on London at a fixed price. If New Zealand money should signs of appreciating in terms of sterling, the office of the board in London would offer lo sell exchange on New Zealand at appropriate rates. Under such management, the Government would have no say in exchange rate questions. 'it. is understood that the hank is unlikely to become an established fact until toward the end of next year.