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I.—2b

359. Then, if the Government wanted an advance of £500,000 from its present bankers, is it not probable that the Bank, in order to make that advance, would contract its advances to the public ?— Of course that would depend on the position of the Bank. It would be impossible under ordinary circumstances for a bank to do so without unduly contracting its other advances. 360. It is probable, at any rate, that if the account were divided between the Associated Banks such an advance required by the Government could be given without so greatly disturbing the public —Yes. 361. Mr. Pearce.] Is the Committee to understand that, in your opinion, if the account were divided the Government could obtain better terms than they have now ? —I can only repeat what I have already said: They could, presuming the account to be in the same position as it has been. 362. Is not the possession of the Government account a very great advantage to the Bank in connection with its circulation ? —-Yes, and in the way of attracting deposits too. 363. I suppose you mean by that that customers are attracted to the Bank by having cheques on it from the Government ?—My meaning is this: A Government contractor, say, receives a large amount of money from the Government. He goes to the Bank, and the probability is that he will open an account with the money. 364. Those are two of the main advantages of having the Government Account ? —Yes. 365. Would it be reasonable, in your opinion, in any arrangement between the Government and the Bank, that the Government should stipulate that the Bank should give an overdraft in anticipation of either loans or revenue ?—To a reasonable amount ; yes. 366. Does not the fact that it is optional on the part of the Bank whether they give an overdraft or not materially affect the rate for the advance ? —Yes, of course. 367. Mr. Curtis.] Do I understand that you mean it would be desirable that the account of the colony should be divided amongst all the banks carrying on business within the Colony ? —Yes, I think so. 368. Then the terms for the Account would have to be arranged between the banks as a whole and the Government ?—Yes. 369. And the Government in that case would be obliged, I suppose, to take such terms as the banks as a whole might agree upon ? —I do not know that they would be bound to accept the terms. 370. I mean that there would be no competition of any kind ?—No. 371. They would not be able to say " we do not think these terms sufficiently liberal, and will go somewhere else " ?—I do not think lamin a position to answer that question. 372. The only way in which they can deal with the banks to divide the Account, would be, I imagine, by having the same terms with the whole of the banks? —Precisely. 373. And these terms would have to be arranged between the banks, as an associated body, and the Government ?—Yes. 374. When the Government keeps its account with one bank, if it does not like the terms of that bank, it is able either to remove the Account to some other bank where better terms can be obtained, or put some pressure on its bank by threatening to do so ?—Yes. 375. Sir F. D. Bell.] In your opinion, would not the possession of so large an amount of money, in London, by the Bank of New Zealand, place that Bank in a very strong position in Lombard Street ?—Yes. 376. Then supposing that no large amount of profit could have been got by placing that money in Lombard Street, did not the mere possession of it, for the purpose of being so placed, give any bank a very strong position in Lombard Street ? —Undoubtedly. 377. Do you think that £ per cent, under the Bank of England rate was a sufficient concession to make, considering the price of money at the time, of which I suppose you are aware ?—I think better terms could have been secured. 378. Do you think that, considering the preponderating power which so considerable a sum of money suddenly placed in one institution must have given that institution, the colony should not have exacted rather more thau f per cent, under the Bank of England rate, and do you not think that in the case of any new transaction of the sort, a further concession than f per cent, ought to be exacted ? —I think that the Government by confining themselves to one institution, should have been able to exact better terms. 379. Now with respect to the future finance. Your attention has been drawn, I presume, to the understanding which appears to have been come to between Sir Julius Vogel and Rothschild, that no new loans should be placed on the market for some considerable time to come?— Yes. 380. Do you think that if the necessities of the public works should require another million of money to be provided, while on the other hand, it would be undesirable to place another million on the Euglish market, —do you suppose that if there was a division of the account between the Banks, the Banks would be able with the authority of Parliament to make an advance for a year or two years of a million of money, so as to avoid contracting a loan ?—I do not think the Banks would pledge themselves, although they might be the means of raising the money. The influence of an association of banks must be greater in London than the influence of only one. 381. I am not referring to the raising of money by placing debentures on the London market. What I wish to know is, whether, in your opinion, the Associated Banks, if the account were divided, would be in a position and willing to advance for a time, a sum of say a million of money, so as to avoid placing debentures on the London market for a year or two ?—I do not think the Banks would pledge themselves. 382. Then, practically, the Government could not look to that as an alternative advantage to them with any degree of certainty ?—Not to the extent you mention. 383. Mr. J. Shephard.] If Sir Julius Vogel, instead of placing this sum (or supposed sum) of a million and a half as he did, had divided it amongst several banks for the sake of getting some temporary advantage, would it be likely that, when afterwards the Government required an advance from the Bank of New Zealand, probably of a considerable amount, the bank might, as against the

Mr. J. Palmer.

7th Sept., 1875.